Can an Employer Have Employees Waive Their Rights to Pursue Litigation

February 17, 2014

In a move sure to please employers, the Fifth Circuit recently overturned the National Labor Relation Board’s ruling in D.R. Horton, Inc. v. NLRB.[1]  The case centered on whether an employer can require, as a condition of employment, an employee to waive his rights to pursue a class action complaint and instead to accept arbitration as a form of dispute resolution.  The Fifth Circuit’s ruling comes as a relief to employers, as arbitration in employment (and many other) contracts is an increasing popular tool to reduce costs from legal disputes and more quickly dispose of litigation.

The upholding of arbitration agreements has become an increasingly common theme in federal courts.  Two years ago, the United States Supreme Court upheld a comparable class action waiver and agreement to arbitrate in consumer cases, which sent waves through consumer industries.[2]  In that case, AT&T Mobility v. Concepcion, the Supreme Court struck down a California law barring waiver of class action suits in consumer contracts with arbitration clauses as conflicting with the Federal Arbitration Act, which the Fifth Circuit relied upon in its D.R. Horton holding this month.

The NLRB’s decision in D.R. Horton held that an employer violated the National Labor Relations Act by requiring employees, as a condition to employment, to accept arbitration of disputes in lieu of pursuing class action complaints.[3]  The Fifth Circuit disagreed in its 2-1 decision, instead finding that there is not a substantive legal right to pursue a class action complaint and that such a right would conflict with the Federal Arbitration Act’s underlying goal of promoting arbitration.  The Fifth Circuit joins the Second, Eight, and Ninth Circuits, who have also reached similar conclusions.[4]

Although the NLRB still has two options for appeal, the decision has large potential impacts on employers and businesses.  It is clear that the trend for federal courts to embrace waivers of class action in arbitration clauses is growing–in employment and consumer cases alike.  For now, a well-drafted arbitration agreement could be the difference between spending years in court with an aggrieved employee or resolving a dispute within months in arbitration at potentially huge cost savings.  Rock Fusco & Connelly’s experienced lawyers have the knowledge and skills to write contracts with arbitration provisions to protect your business and to guide your company through the arbitration process.


[1] Case No. 12-60031, Opinion filed December 3, 2013.
[2] See generally AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011).
[3] See generally In re D.R. Horton, Inc., 375 NLRB No. 184, 2012 WL 36274 (N.L.R.B. Jan. 3., 2013).
[4] See generally Sutherland v. Ernest & Young, LLP, 726 F.3d 290 (2d Cir. 2013); Owen v. Bristol Care, Inc., 702 F.3d 1050 (8th Cir. 2013); Richards v. Ernest & Young, LLP, Case No. 11-17530, 2013 WL 4437601 ((th Cir., Aug. 21, 2013).