By Kelline R. Linton,
On Monday, the Fifth Circuit upheld the validity of arbitration agreements that bar employees from pursuing collective actions, affirming the Court’s precedent established in D.R. Horton, Inc.
In Murphy Oil USA v. NLRB, No. 14-60800 (5th Cir. Oct. 26, 2015), the company’s employees signed an arbitration agreement that provided all disputes or claims that related to employment would be submitted to binding arbitration. The agreement further required employees to waive their right to pursue class or collective actions in the arbitral forum. When four employees filed an FLSA wage-hour collective action against Murphy Oil, the company moved to dismiss the collective action and compel arbitration. In response, one of the employees filed an unfair labor charge with the NLRB based on the claim that the arbitration agreement interfered with her Section 7 rights to engage in protected concerted activity. The Board sided with the employee and ruled the arbitration agreement unlawfully barred workers from pursuing class and collective actions (Murphy Oil USA, Inc., 361 NLRB 72 (2014)). On Monday, the Fifth Circuit reversed this decision.
The NLRB has consistently maintained that collective action waivers in arbitration agreements violate the National Labor Relations Act (“NLRA”), and Murphy Oil is the second time the Fifth Circuit reversed the NLRB on this issue. In January 2012, the Board held for the first time that an employer violated Section 8(a)(1) of the NLRA by requiring employees to sign an arbitration agreement waiving their right to pursue class and collective claims in all forums because such agreements restricted employees’ Section 7 rights (D.R. Horton, Inc., 357 NLRB 184 (2012)). The Fifth Circuit overturned this ruling on appeal in D.R. Horton, Inc., 737 F.3d 344 (5th Cir. 2013).
Advice for Employers: Although the NLRB continues to find collective action waivers unlawful, the only courts of appeals—the Second, Fifth, Eighth, and Ninth Circuits—to have considered the issue have upheld these waivers. In light of the Fifth Circuit’s recent affirmation, employers may want to consider implementing arbitration agreements that contain an express waiver of class and collective actions, as these agreements can be powerful tools to avoid the substantial expense of FLSA collective actions.