No Class Action Waivers in Arbitration Agreements, Says NLRB

The National Labor Relations Board (NLRB) has decided to follow its own oft-criticized 2012 decision in D.R. Horton, holding that arbitration agreements barring class action lawsuits about working conditions, which are signed by employees as a condition of employment, are unlawful under the National Labor Relations Act.

In the case, Murphy Oil USA, Inc. and Sheila Hobson, 361 NLRB No. 72, (Oct. 28, 2014), the binding arbitration agreement at issue was provided to employee Sheila Hobson by her employer Murphy Oil USA as a condition of employment when she was hired to work at the company's Calera, Alabama facility.

Hobson later filed a collective action in the United States District Court for the Northern District of Alabama, alleging violations of the Fair Labor Standards Act. Murphy Oil filed a motion to compel arbitration, seeking to force Hobson and others to arbitrate their claims on an individual basis rather than file a collective suit. In response, Hobson filed an unfair labor practice charge with the NLRB; a NLRB complaint was subsequently issued against Murphy Oil, alleging that the arbitration agreement signed by Hobson and others violated Section 7 of the NLRA by prohibiting employees from litigating their employment-related claims concertedly.

The District Court granted Murphy Oil's motion to compel individual arbitration. While the District Court action was stayed pending arbitration, however, the NLRB issued its decision striking the class action ban in Murphy Oil's arbitration agreement.

This decision stokes the flames ignited by the NLRB in D.R. Horton, a decision that was subsequently overturned by the Fifth Circuit Court of Appeals, rejected by many federal courts, and strongly criticized by some (including the Fifth Circuit in its ruling) as conflicting with United States Supreme Court precedent as set forth in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011). Given this backdrop, employers should make note of the NLRB's ruling as it is likely an appeal will follow, which may end up at the United States Supreme Court. If you have any questions about the case or your own agreements, please contact your Hinshaw employment attorney.