Is No Class Action Waiver Safe From the NLRB's Sword?

Despite getting virtually no backing from the courts, the National Labor Relations Board continues to invalidate employers’ arbitration policies that require employees to waive their right to collective or class actions involving employment-related claims.

You may recall that the Board decided in 2012, in the D.R. Horton decision (here), that such provisions are invalid, and the U. S. Court of Appeals for the Fifth Circuit refused to enforce that portion of the decision.  Unfazed, the NLRB has continued to apply its rejected rationale to invalidate similar prohibitions in employer policies, even where there is no union involved.

The most recent decision (here) came out on Thursday.  The Board determined that Kmart Corporation violated Section 8(a)(1) of the National Labor Relations Act by maintaining an employment policy that required employees, as a condition of employment, to waive the right to maintain class or collective actions in all forums, whether arbitral or judicial.  The NLRB found the violation even though Kmart’s arbitration policy contained an opt-out provision.

For employers wanting to implement class action waivers in arbitration agreements, the good news is that most courts across the country are quite amenable.  The bad news is that getting to an appellate court can be a costly process, and the NLRB shows no signs of changing its tune any time soon.  The Board only has to reverse course if the Supreme Court or a later decision by the Board itself directs it to do so.  Maybe the NLRB is waiting for a different case with more favorable facts before trying to get the Supreme Court on its side, or perhaps it is waiting for a different Supreme Court with more favorable members.

Whatever the case, employers should expect that the NLRB will continue to find violations when employees are required to sign waivers of class or collective actions, even though four federal appellate circuit courts have ruled against the agency on the issue.  Nor does it apparently matter at all to the Board that many of the challenged policies allow the employees an opportunity to opt-out of the waiver agreements altogether.