In House - The FindLaw Corporate Counsel Blog

In Murphy Oil, NLRB Reaffirms Its Stance on Class Action Waivers

As we know by now (and are probably sick of hearing), class action waivers are totally fine if they're couched a part of an arbitration clause. But what about when an employment agreement contains an arbitration clause that purports to preclude employees' abilities to file joint or class complaints against the employer?

No bueno, said the National Labor Relations Board in an October decision called Murphy Oil. The decision is significant not only because it departs from the Supreme Court's increasingly permissive stance on arbitration agreements, but because it upholds a doctrine that at least three federal circuit courts of appeals view as either unpersuasive or reject outright.

Is a Class Action a Labor Right?

The facts are simple enough: Murphy Oil operates a chain of gas stations all over the place. In 2012, it required current and prospective employees to sign an agreement in which all employment disputes would go to binding arbitration and in which employees waived their rights to jury trials or class actions.

Murphy really wanted the NLRB to overrule D.R. Horton, a 2012 decision in which the NLRB found that class or joint action waivers unlawfully restrict employees' "right to engage in concerted action for mutual aid or protection" under Section 7 of the National Labor Relations Act. On appeal last year, the Fifth Circuit refused to enforce the NLRB's D.R. Horton decision, finding that "[t]he use of class action procedures ... is not a substantive right" protected by the Act. The Eighth and Second circuits also declined to follow D.R. Horton.

No, the NLRB Won't Back Down

Even in the face of this criticism, the NLRB didn't back down in Murphy Oil, doubling down on its D.R. Horton reasoning and noting that, whatever the other circuits might think, "[s]cholarly support the Board's approach, by contrast, has been strong."

The NLRB can get away with this because the Supreme Court has never ruled specifically on whether the Federal Arbitration Act precludes the use of a class action waiver in spite of Section 7. The NLRB disagreed with the Fifth Circuit, saying class actions were "substantive rights" and as such, Section 7 prevented their abrogation, even under the FAA.

In case you didn't think this was a contentious issue, two Board members wrote separate dissenting opinions, each insisting that D.R. Horton was wrongly decided.

More of the Same

For general counsel, Murphy Oil doesn't particularly change very much. It just confirms that this issue is going to be at the Supreme Court before long -- and only then will there be a definitive answer to this question.

For now, it would seem that the great weight of legal opinion is in favor of enforcing class action waivers in employment arbitration agreements, especially given the Supreme Court's penchant for enforcing arbitration agreements no matter what.

Related Resources: