5th Circuit Upholds Class Waiver Without an Arbitration Agreement

In a 2-1 decision, the United States Court of Appeals for the Fifth Circuit has overturned a National Labor Relations Board (“NLRB”) ruling stating an employer may not require job applicants to sign a class-action waiver that is not included in an arbitration agreement because such a requirement violates the National Labor Relations Act (“NLRA”).  In Convergys Corp. v. NLRB, No. 15-60860 (5^th Cir., August 7, 2017), an Ohio-based company, Convergys, required all prospective employees to sign a waiver stating the individuals would not engage in collective action against the company.  Unlike many other NLRB decisions involving class-action waivers, the Convergys waiver was not included in an arbitration agreement.

A Convergys worker who signed the class-action waiver as part of the employment process later brought a collective action lawsuit against the company over its purported Fair Labor Standards Act violations.  After Convergys sought to enforce the class waiver in the case, the worker filed a charge with the NLRB.  Although the lawsuit was ultimately settled, the NLRB “ordered Convergys to cease and desist from requiring applicants to sign a waiver, to cease and desist from enforcing the waiver, and to take steps to ensure all applicants and current and former employees knew the waiver was no longer in force.” In response, Convergys filed an appeal with the nation’s Fifth Circuit.  Likewise, the NLRB sought enforcement of its order through a cross-application.

On appeal, the court first examined whether Section 7 of the NLRA guaranteed an employee’s right to engage in collective action.  Relying on its 2013 decision in D.R. Horton, the court said:

This court has already rejected the Board’s position that Section 7 guarantees a right to participate in class or collective actions, holding that the use of a class or collective action is a procedure rather than a substantive right. Horton, 737 F.3d at 357; id. at 361; see also id. at 362 (noting that, under the Board’s interpretation, “the NLRA would have to be protecting a right of access to a procedure that did not exist when the NLRA was (re)enacted”). Despite our decision in Horton and similar rulings by a majority of circuits that have considered the issue, the Board has persistently clung to its view that Section 7 guarantees a substantive right to participate in class and collective actions, and we have persistently declined to enforce Board orders based on this disregard of our law.5 We recognize that the Supreme Court’s decision in NLRB v. Murphy Oil USA, Inc., cert. granted, 137 S. Ct. 809 (2017), may resolve the issue shortly. In the meantime, however, we must apply our circuit’s binding precedent. See, e.g., Horton, 737 F.3d at 344; Murphy Oil, 808 F.3d at 1013.

The court continued by stating:

Because our decision in Horton was based on our interpretation of Section 7 and our reasoning was not limited to interpretation and application of the FAA, the Board’s argument that Horton is limited to the arbitration context is unpersuasive. Horton’s interpretation of Section 7 is binding on this panel. See Jacobs v. Nat’l Drug Intelligence Ctr., 548 F.3d 375, 378 (5th Cir. 2008) (“[O]ne panel of our court may not overturn another panel’s decision, absent an intervening change in the law, such as by a statutory amendment, or the Supreme Court, or our en banc court.”); see also Gochicoa v. Johnson, 238 F.3d 278, 286 n.11 (5th Cir. 2000) (“When confronting decisions of prior panels . . . we are bound by not only the result but also those portions of the opinion necessary to that result.”).

The Board’s argument that Section 7 creates a substantive right to participate in class and collective actions ignores Horton’s contrary holding that “[t]he use of class action procedures . . . is not a substantive right.” Horton, 737 F.3d at 357. Moreover, the Board’s assertion that the waiver in Horton was permissible only because the FAA overrode the NLRA contradicts our determination in Horton that the statutes are not in conflict. See id. at 361. Finally, the Board’s suggestion that Horton is distinguishable because the FAA empowers arbitration agreements to waive rights that other agreements cannot waive is contrary to Supreme Court precedent, which holds that the FAA places arbitration agreements “on an equal footing with other contracts.” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011). For all these reasons, Horton precludes the Board’s position.

In an opinion authored by Judge Elrod, the Fifth Circuit Court of Appeals ultimately held “Convergys did not engage in an unfair labor practice” by requiring job applicants to sign a class-action waiver.  Judge Higginson wrote separately to concur in the judgment only.  Judge Higginbotham also authored a lengthy dissent stating “The Board’s decision that Convergys violated Section 8(a)(1) of the NLRA should be enforced.”

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