This Client Alert updates our previous Client Alerts on continuing news and developments from the National Labor Relations Board (NLRB).

NLRB Rules That Mandatory Arbitration Agreements Prohibiting Employees from Bringing Class or Collective Employment Action Are Unlawful

In a recent decision, the NLRB ruled that a mandatory arbitration agreement in the employment context is unlawful if it prevents employees from pursuing class or collective employment actions against the employer.

In D.R. Horton and Michael Cuda, Case No. 12-CA-25764 (January 3, 2012), the NLRB analyzed an arbitration agreement that employees were required to sign as a condition of employment. In relevant part, the agreement (1) required that all employment disputes be decided by arbitration, (2) prohibited the arbitrator from consolidating individual claims, creating a class or collective action or awarding relief to a group of employees and (3) required that employees waive their right to file employment-related lawsuits or other civil proceedings against the employer.

The NLRB held that the agreement violated employees’ rights under the National Labor Relations Act (the Act). The NLRB reasoned that when employees join together in a class or collective action against an employer to address an employment issue, they are exercising their right “to engage in concerted action for mutual aid or protection.” The NLRB stated that this decision does not require arbitration agreements to provide class arbitration so long as the agreement permits class actions in a judicial forum. The NLRB rejected the arguments of the employer and other interested parties and held that its decision was consistent with the Federal Arbitration Act.

This decision is significant because it prevents non-union private sector employers from using arbitration agreements to prohibit employees from pursuing class or collective actions.

President Obama Appoints Three New Members to the NLRB

Following last week’s expiration of NLRB Member Craig Becker’s term, President Obama filled three vacancies on the NLRB with recess appointments. The recess appointments include two Democrats and one Republican. The NLRB will now have a full board of three Democrats and two Republicans.

The recess appointments caused significant political controversy, with Republicans arguing that the Senate was not actually in recess, and therefore, the appointments were unlawful. The controversy exemplifies the continued politicization of the NLRB.