Reinsurance Focus

The Fifth Circuit Court of Appeals reversed in part a decision by the National Labor Relations Board which held that D.R. Horton, a homebuilder with operations in over twenty states, had violated the National Labor Relations Act by requiring its employees to sign an arbitration agreement that prohibited them from pursuing collective or class claims addressing their wages, hours, or other working conditions against the employer in any forum, arbitral or judicial. Deferring to the NLRB’s interpretation of the National Labor Relations Act to the extent it could, the Fifth Circuit nonetheless found that the NLRB paid insufficient respect to other federal statutes and policies, namely the Federal Arbitration Act. The Court first emphasized that the FAA’s purpose is to ensure the enforcement of arbitration agreements according to their terms. However, requiring class arbitration interferes with fundamental attributes of arbitration, primarily its informality, and thus creates a scheme inconsistent with the FAA. Thus, consistent with the FAA, D.R. Horton’s prohibition should be upheld, absent an overriding contrary congressional command in the NLRA. Because (1) the NLRA contains no explicit language about, and does not even mention, collective action, much less the procedures such an action would employ, (2) the legislative history of the NLRA discusses no right to file class or consolidated claims against employers, and because (3) the NLRA was enacted prior to the advent of modern class action practice, the Court held that the class arbitration agreement must be enforced according to its terms. Additionally, the Court upheld the NLRB’s determination that D.R. Horton must clarify with its employees that the arbitration agreement language did not eliminate entirely their right to pursue claims of unfair labor practices with the NLRB. D.R. Horton, Inc. v. National Labor Relations Board, No. 12-60031 (5th Cir. Dec. 3, 2013).

This post written by Kyle Whitehead.

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