NLRB ‘Doubles Down’: Board Affirms Controversial Ruling Barring Mandatory Agreements That Prohibit Arbitration Of Class Or Collective Action Employment Disputes

In January 2012, the National Labor Relations Board (NLRB or Board) decided arbitration clauses in employment contracts that require individual arbitration, rather than class-wide or collective actions, violate Section 8(a)(1) of the National Labor Relations Act (the NLRA or Act). The Board's ruling in D.R. Horton Inc., 357 NLRB No. 184 (Jan. 3, 2012), immediately became a labor law lightning rod — garnering criticism on a number of grounds, including the claim that it could not be reconciled with the Supreme Court's decisions upholding bans on class arbitration, especially AT&T Mobility LLC v. Concepcion, 563 U.S. 321 (2011), Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662 (2010), and Gilmer v. Intertate/Johnson Lane Corp., 500 U.S. 20 (1991).

On appeal, the Fifth Circuit overruled the NLRB, holding that it is lawful for an employer and an employee to enter into an agreement to arbitrate employment-related claims — and to do so only on an individual basis, lawfully precluding class-wide and collective actions brought on behalf of employees. See D.R. Horton, Inc. v. N.L.R.B., 737 F.3d 344 (5th Cir. 2013). The Fifth Circuit held that the NLRA does not give employees a substantive right to pursue collective or class actions, and that employees could therefore consent by contract to forfeit such remedies without running afoul of the Act. Earlier this year, the Fifth Circuit denied the NLRB's petition for rehearing en banc. Other circuits, specifically the Second and the Eighth, have joined the Fifth Circuit in their reasoning, as have several federal district courts and, most recently, the California Supreme Court.

On October 28, 2014, the NLRB discredited this voluminous body of precedent, holding in Murphy Oil USA, 361 NLRB No. 72 (Oct. 28, 2014), that a gas station chain's arbitration pact ran afoul of Section 8(a)(1) by interfering with employees' Section 7 rights to engage in protected concerted activity. In so ruling, the Board has once more thrown its weight behind the oft-criticized (and long-since repudiated) D.H. Horton decision, and has set the stage for either the Eleventh Circuit or DC Circuit (which would hear the appeal if Murphy Oil so files) to either reverse the NLRB or, if it doesn't, to create a circuit split, all but guaranteeing that this issue will end up in the Supreme Court.

The binding arbitration agreement at issue in Murphy Oil was provided to Sheila Hobson, an employee of Murphy Oil USA, as a condition...