NLRB Arbitration Decision Overturned

December 18, 2013

pic-court-gavelOn Dec. 3, the Fifth U.S. Circuit Court of Appeals overturned a National Labor Relations Board (NLRB) decision that prohibited employers from using arbitration agreements in employment contracts to require employees individually seek arbitration to resolve disputes. This decision is a win for business, and particularly smaller businesses that often cannot bear the massive costs of class action suits.

The initial NLRB decision—made back in January of 2012—stems from by rising class-action and collective-action lawsuits being brought against employers in recent years, prompting employers to include arbitration clauses in employment contracts and require employees to sign arbitration agreements prior to being hired. In its ruling, NLRB said that the Federal Arbitration Act cannot be used to prevent workers covered by the National Labor Relations Act (NLRA) from resolving disputes as a group.

In striking down the NLRB ruling, the Court of Appeals stated that the NLRB’s failure to give proper wait to the Federal Arbitration Act and stated that the use of class action procedures is “not a substantive right.” The court furthermore found that the NLRA does not include Congressional command that prevents arbitration agreements from being used.

The NLRB has said they are evaluating the ruling and no decision has yet been made on whether or not they will appeal.