NLRB judge rules forced arbitration agreement without class action waiver unenforceable

Posted on: February 26th, 2014 by Steve Larson
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Magnifying Glass Over Contract PapersA National Labor Relations Board judge applied the controversial D.R. Horton decision in her ruling that an arbitration agreement that did not expressly bar workers from bringing class or collective actions still violated federal labor law because it had the practical effect of doing so.  Administrative Law Judge Lisa Thompson sank Leslie’s Poolmart Inc.’s challenge to the NLRB general counsel’s complaint claiming the employer intended employees to give up their right to pursue class, collective or representative claims, even though the arbitration pact at issue didn’t explicitly require workers to forgo proceedings on a class basis.

The dispute stems from ex-employee Keith Cunningham’s overtime class action, which Leslie’s Poolmart removed from state to federal court before filing a motion to compel arbitration of his individual claims and seeking dismissal of his class/collective claims. The trial court acquiesced, nixing the classwide claims and finding that Cunningham’s individual claims had to go to arbitration, but refused to block him from pursuing a representative claim under California’s Private Attorney General Act.

Judge Thompson said that D.R. Horton was “currently binding” and denied Leslie’s bid for a stay pending the U.S. Supreme Court’s ruling in the blockbuster Noel Canning case, going on to say that although the arbitration agreement doesn’t preclude class actions on its face, it has “the effect of doing so as evinced when respondent, in moving to compel arbitration of his claims, sought to preclude Cunningham from filing a class action lawsuit.”

“While the agreement is silent as to collective or class actions, in practice, respondent closed the avenue to pursue collective and/or classwide litigation when it sought to limit Cunningham and other similarly situated employees to arbitration of their individual claims,” Judge Thompson said.

“Because I am currently bound by the ruling in D.R. Horton until it is reversed by the Supreme Court, I do not find anything meaningfully distinguishable between respondent’s arbitration agreement and the one in D. R. Horton, which the board found violative of the act.”

In December, the Fifth Circuit sided with D.R. Horton in the homebuilder’s challenge to the labor board’s holding that mandatory arbitration agreements barring employees from pursuing class or collective claims violate workers’ labor-law-protected right to band together.

A divided appellate panel found the NLRB’s decision did not give proper weight to the Federal Arbitration Act, holding that the use of class action procedures is “not a substantive right” and that the National Labor Relations Act does not contain a congressional command that prevents arbitration agreements from being enforced on their terms.

Leslie’s Poolmart ran afoul of the NLRA by maintaining and enforcing the company’s arbitration agreement, which “not expressly but in practice” required workers to waive their collective and class action rights, and by seeking to enforce the “unlawful” agreement by filing the motion to compel in federal court.

The case is Leslie’s Poolmart Inc. and Keith Cunningham, case number 21-CA-102332, before the National Labor Relations Board.