By: Howard M. Wexler, Esq.
As our loyal blog readers are most certainly aware, the National Labor Relations Board’s D.R. Horton decision has been heavily criticized by courts around the country. In fact, earlier this month the Second Circuit Court of Appeals in Sutherland v. Ernst & Young LLP [discussed here] overturned a lower court’s ruling and enforced a class action waiver in the wage-hour context and said it would “decline to follow” D.R. Horton and “owe[s] no deference to its reasoning,” especially given the fact that “In re D.R. Horton may have been decided by the National Labor Relations Board without a proper quorum.”
Despite the proverbial chorus of boos being showered upon the Board’s D.R. Horton decision, the Board remains an island unto itself and continues to rely on this decision to invalidate class action waivers. Most recently, an NLRB Administrative Law Judge in the case of Everglades College, Inc., relying on D.R. Horton, refused to enforce the college’s arbitration agreement since its “broad language, applying to all causes of action for discrimination or harassment under Federal, State, or local laws, would reasonably be read by employees to prohibit the filing of unfair labor practice charges with the Board” and because it required employees to waive having claims heard or arbitrated as a class or collective action.
What’s especially interesting here is the fact that the ALJ invalided the arbitration agreement despite the fact that, unlike the clause in D.R. Horton, the agreement contained a provision that exempted from arbitration those claims which are “specifically prohibited by law” from being arbitrated. Although it appears that this language would “solve” the D.R. Horton problem, the ALJ nonetheless found the phrase to be ambiguous since “employees cannot be expected to possess a working knowledge of all Federal, State, and local laws which specifically prohibit mandatory arbitration of claims.” With respect to the waiver of class/collective actions, the ALJ found the clause to be indistinguishable from the clause in D.R. Horton and therefore held that it violated the Act.
As courts continue to decline to follow the reasoning of D.R. Horton, and in light of the Supreme Court’s June 20 decision in American Express Co. v. Italian Colors Restaurant which enforced (albeit in an antitrust context) a class-action wavier provision in an arbitration agreement, a decision such as this one from an NLRB judge constitutes an anomaly. The Board finds itself in a distinct minority in terms of its resistance to class action waivers. However, as long as D.R. Horton remains “good Board law,” the Board and its ALJs will continue to rely upon it to invalidate class waivers in arbitration agreements.