NLRB judge holds grocery chain’s class action waivers were unenforceable

April 10, 2014 by

Magnifying Glass Over Contract PapersA National Labor Relations Board judge ruled that Sprouts Farmers Markets LLC had violated federal labor law by requiring its workers to sign an arbitration agreement containing a class waiver.

The NLRB judge rejected the company’s arguments that the board’s D.R. Horton decision should not apply.

Administrative Law Judge Ira Sandron found that the grocery chain’s arbitration agreement with its workers could not stand in light of the D.R. Horton decision, in which the NLRB held that an employer violates the National Labor Relations Act by requiring employees to waive their right to bring class or collective claims.

Because the judge deemed the agreement unlawful, he ruled that the company had also violated the act by enforcing the agreement to compel individual arbitration of a putative wage-and-hour class action lodged by an employee in California state court and by firing another employee for refusing to sign the agreement. Some versions of the pact contained an explicit class waiver, while others were silent on the issue, which the company interpreted to mean class arbitration was not permitted.

In finding that forcing employees to sign the agreement violated the law, Judge Sandron rejected Sprouts Farmers Markets’ arguments that D.R. Horton should not be applied on both procedural and substantive grounds.

Procedurally, the company contended that the NLRB had lacked a quorum when it issued the D.R. Horton decision under the D.C. Circuit’s Noel Canning ruling, which invalidated the president’s recess appointments to the board.

The judge, however, dismissed this argument, saying the board has rejected the position that it could not validly issue decisions when two of its three members were recess appointments.

On the substantive side, Sprouts Farmers Markets asserted that the D.R. Horton decision should not be applied because the Fifth Circuit had rejected it and other courts had declined to follow it.

But citing the NLRB’s policy of nonacquiescence, Judge Sandron said he was bound to follow the board’s ruling unless it were to be overturned by the Supreme Court. Although the high court has enforced individual arbitration agreements in other settings, it has never directly weighed in on the intersection of the NLRA and the Federal Arbitration Act and has therefore not overturned D.R. Horton, the judge said.

The grocery chain further maintained that even if D.R. Horton did apply, the agreements in question fell within an exception to the rule. But the judge also nixed that argument, saying the agreements did exactly what the NLRB had intended to prohibit in its ruling.

According to its website, the grocery chain operates more than 160 stores throughout Arizona, California, Colorado, Nevada, New Mexico, Oklahoma, Texas and Utah.  The agreements at issue in the NLRB case were signed by employees in California.

The case is Sprouts Farmers Markets LLC, case numbers 21–CA–099065 and 21–CA–104677, before the National Labor Relations Board.

Steve Larson
An experienced trial lawyer who handles both hourly and contingent fee cases, Steve has expertise in class actions, consumer cases, antitrust litigation, securities litigation, corporate disputes, intellectual property disputes, unfair competition claims, employment matters, and disputes involving family wealth. Steve regularly represents individuals and businesses in federal and state court and has obtained class-wide recovery in multiple class actions. A veteran practitioner, Steve's clients value his creative approach to resolving complex litigation matters.

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