Courts Signal Hostility to NLRB Class Action Ruling

August 27, 2012

by Nicole Flatow

In the wake of the U.S. Supreme Court’s 2011 ruling limiting class actions in AT&T v. Concepcion, the National Labor Relations Board issued a ruling that gave hope to those seeking to hold their employers accountable.

The ruling invalidated an arbitration agreement that blocked employees from banding together as a class, and it was grounded in a provision of the National Labor Relations Act that protects employees’ right to act collectively. But in the months since the January ruling, all but a few courts have declined to adopt the NLRB’s reasoning, signaling that the administrative decision may not have the impact some had hoped.

Thompson Reuters’ Nate Raymond looks at 16 federal and state court decisions over the past seven months, and finds that 13 of them disregarded the NLRB’s decision. Some found that the Federal Arbitration Act controlled; others that only the Supreme Court’s Concepcion decision applies.

The initial NLRB decision, D.R. Horton, is still pending on appeal to the U.S. Court of Appeals for the Fifth Circuit. And in one decision that did adopt the NLRB’s reasoning, the court distinguished Concepcion, which did not involve a conflict with the NLRA. But thus far, courts have signaled that the NLRB’s decision will have little impact on employees’ access to justice.

D.R. Horton is not the only case with the potential to preserve some limits on arbitration clauses. A Second Circuit decision in February struck down an arbitration clause with a class action waiver, where an economist was able to show that no rational plaintiff would bear the cost alone of winning such a complicated antitrust case, when the potential payout was so comparatively small. 

The case was twice reversed by the U.S. Supreme Court for reconsideration in light of Concepcion and another limiting Supreme Court precedent, and twice more, the court maintained its holding.

In that case, as in the NLRB decision, the court held that the plaintiffs would effectively be deprived of their substantive rights if their ability to issue a challenge as a class was blocked.

“Class claims frequently offer the only vehicle for consumers or employees to challenge unlawful actions that cause limited damages to each individual while often reaping millions for business,” law professor Ann C. Hodges wrote in an ACSblog analysis of D.R. Horton. “… In the workplace, Fair Labor Standards Act cases seeking minimum wage or overtime payments are most likely to be abandoned on this basis and Horton involved such a claim, alleging that the nonunion employer misclassified employees as exempt from overtime pay.”

Concepcion is just one of several recent arbitration cases in which the Supreme Court has sided with corporations. Last term, in CompuCredit v. Greenwood, the court upheld an arbitration clause that barred lawsuits even though the Credit Repair Organizations Act explicitly says “you have a right to sue.”

The litigants in this case were challenging hidden credit card fees of $257 on a card with a limit of $300 dollars, and they now join the growing number of consumers and employees “stuck in arbitration.”