California Court Of Appeal Rejects NLRB's View That Federal Labor Law Prevents Use Of Class Waivers In Employment Arbitration Provisions

Originally published July 24, 2012

Keywords: NLRB, federal labor law, class waivers, employment arbitration.

Twice in as many months, the California state appellate courts have enforced an arbitration agreement requiring arbitration of wage-and-hour claims on an individual basis. The First District Court of Appeal's decision in Nelsen v. Legacy Partners Residential, Inc., 2012 WL 2913809 (Cal. Ct. App. July 18, 2012), follows a similar decision by the Second District and represents another sign that California courts are taking heed of the U.S. Supreme Court's broad pro-arbitration holding in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011). (Please see our prior Legal Update about the Second District's decision in Iskanian v. CLS Transportation Los Angeles, LLC, 206 Cal. App. 4th 949 (Ct. App. 2012), pet. for review filed, No. S204032 (July 16, 2012).)

The plaintiff in Nelsen had worked as a property manager for Legacy Partners. When Nelsen was hired, she agreed to an arbitration provision that (as the court interpreted it) authorized arbitration only on an individual not 'class-wide' basis. Nelsen later filed a putative class action, alleging that she was deprived of overtime and rest and meal breaks. In response, Legacy Partners filed a motion to compel arbitration, and the superior court granted the motion.

The First District Court of Appeal upheld the order compelling arbitration. Most significantly, the court rejected Nelsen's argument that requiring arbitration of employment disputes on an individual basis violates the National Labor Relations Act, which protects the rights of employees "to engage in ... concerted activities for the purpose of collective bargaining or other mutual aid or protection." Recognizing that the National Labor Relations Board had concluded otherwise in In re D.R. Horton, Inc., 357 NLRB No. 184 (Jan. 3. 2012), the California court explained that it viewed Horton as unpersuasive. (Horton is currently on appeal to the Fifth Circuit.)

The court first explained that "[o]nly two Board members subscribed to [Horton]" and that those members "lacked the benefit of dialogue with a full board or dissenting colleagues." Second, the court explained that the interplay between the Federal Arbitration Act and the NLRA "falls well outside the Board's core expertise in collective bargaining and unfair practices." The court also observed that the NLRB's decision was unsupported by precedent and was inconsistent with...