When employers require employees to sign mandatory arbitration agreements, the agreements typically state that any subsequent arbitration must be brought in the employee’s individual capacity. In other words, the agreements ban employees from participating in class or collective action arbitration of their claims. For years, the National Labor Relations Board has taken the view that such class action waivers violate Section 7 of the NLRA, because they could prevent employees from pursuing their rights through collective action.

Last month, the Fifth Circuit rejected this position for the second time, finding that the Federal Arbitration Act allows parties to mandatory arbitration agreements to agree to limit proceedings to individual actions. In Murphy Oil USA, Inc. v. NLRB, the Board ignored the Fifth Circuit’s earlier decision in the D.R. Horton case, which initially rejected the Board’s position on the issue of class action waivers. The employer appealed to the Fifth Circuit, and the NLRB requested an en banc hearing to revisit the earlier decision. The court denied the NLRB’s request, and the Fifth Circuit panel reviewing the new case concluded that it was inconsistent with precedent established in D.R. Horton.

The Fifth Circuit and the NLRB appear to be at an impasse with regard to this legal issue. The court denied the employer’s motion to sanction the Board, noting that the NLRB has the right to independently review each case brought before the agency. That said, the Fifth Circuit gave no indication that alternative fact patterns would result in a decision invalidating class action waivers.

The NLRB’s position in this case indicates its unwillingness to acquiesce to federal court decisions covering certain parts of the U.S. The Board appears willing to defy these decisions in favor of a strict position prohibiting use of class waivers. This view leaves employers little alternative but to approach litigation with the intent to appeal these cases to federal court, knowing that the NLRB will ignore prior court decisions on this point. The NLRB has strategically decided not to appeal these losses to the U.S. Supreme Court under the very fair assumption that the Court’s strong pro-arbitration view would likely result in a nationwide rejection of its position on class action waivers.