By: Michele Haydel Gehrke, Esq.

On November 8, 2013, Administrative Law Judge Bruce D. Rosenstein upheld a class action waiver in a mandatory employment arbitration agreement notwithstanding the NLRB’s controversial ruling in D.R. Horton banning such class action waivers because they purportedly chill employees’ rights to engage in concerted protected activity under Section 7 of the NLRA.

In Chesapeake Energy Corporation, Case No. 14-CA-100530, a non-union at-will employee filed a charge contesting his employer’s dispute resolution program (“DRP”), which required employees to bring all employment-related disputes in arbitration (including any issues arising under the NLRA) and waive their right to bring a class action or other representative lawsuit. The Acting General Counsel filed a Complaint against the employer and argued that the DRP was unlawful because of the class action ban, and because the DRP including claims arising under the NLRA which could cutoff employees’ access to the Board. 

With respect to the class action waiver ban, the employer argued that the recent United States Supreme Court decision in American Express Co. v. Italian Colors Restaurants, 133 S.Ct. 2304 (2013) contravenes the Board’s D.R. Horton ruling. In American Express, the Supreme Court enforced an arbitration agreement that included a class action waiver under the Federal Arbitration Act, even though the cost of prevailing on the claim in individual arbitration would likely exceed any potential recovery. The Supreme Court noted in American Express that no contrary Congressional command required the rejection of class action waivers, and the Sherman and Clayton Acts at issue made no mention of class actions. Further, these statutes were enacted before the advent of class actions under Federal Rule of Civil Procedure 23. 

Judge Rosenstein found the employer’s arguments persuasive and held “that the Board’s position that class and collective action waivers in arbitration agreements violate Section 8(a)(1) of the Act cannot be sustained.” The Judge dismissed that allegation of the Complaint. 

However, the Judge did find merit to the allegation that the DRP interfered with employees’ access to the Board and its processes by subjecting claims arising under the NLRA to binding arbitration, and found a violation of Section 8(a)(1). He ordered the employer to rescind or revise the DRP to exclude unfair labor practice allegations under the NLRA and the right of employees to file charges with the Board.  He also required the employer to post a notice. 

Judge Rosenstein’s decision is significant because he declined to follow D.R. Horton, notwithstanding the well-established rule that ALJs are bound by Board decisions unless they have been overturned by the Supreme Court or the Board.  D.R. Horton is on appeal to the United States Court of Appeal for the Fifth Circuit and, while heavily criticized, is technically still binding Board precedent. Other ALJs have continued to follow D.R. Horton while the appeal is pending.

It will be interesting to see whether other ALJs follow Judge Rosenstein’s lead and decline to follow D.R. Horton while we await further word from the Fifth Circuit. In the meanwhile, let’s be thankful for this decision and hope that D.R. Horton is reversed on appeal. Stay tuned for more developments here.