The National Labor Relations Board (the "NLRB" or the “Board”) has ruled that a mandatory arbitration agreement preventing employees from pursuing class or collective claims against their employer is unlawful under the National Labor Relations Act (“NLRA” or the “Act”).
In D. R. Horton, Inc., the Board held that merely maintaining such agreements with nonsupervisory employees constitutes an unfair labor practice by interfering with nonsupervisory employees’ right, under Section 7 of the Act, to engage in “concerted activities” to affect wages, hours, and other terms and conditions of employment. The Board further ruled that an arbitration agreement requiring nonsupervisory employees to submit all employment-related claims to arbitration violates the NLRA by leading employees to believe that they may not file unfair labor practice charges with the Board. While the Board sought to downplay the scope of its ruling, the decision not only may increase the number of class and collective actions filed, but also means that both unionized and non-unionized employers throughout most of the private sector should review, and potentially rewrite, the arbitration provisions contained in their employment agreements, handbooks, and policies.
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