Fifth Circuit Adheres to D.R. Horton, Upholds Class Arbitration Waiver in Employment Dispute

The United States Court of Appeals for the Fifth Circuit has once again rejected the National Labor Relations Board’s (“NLRB”) efforts to ban class action arbitration waivers. In Murphy Oil USA, Inc. v. National Labor Relations Board, No. 14-60800 (5^th Cir. Oct. 26, 2015), gasoline retailer Murphy Oil required an employee, Hobson, to sign a binding arbitration agreement as a condition of employment with the company.   Later, Hobson and three other workers filed a collective action lawsuit in Alabama against Murphy Oil over a number of purported Fair Labor Standards Act violations. The company sought to compel the dispute to arbitration and asked the Alabama court to order the workers to engage in individual and separate arbitral proceedings. The court granted Murphy Oil’s motion and ordered the workers to submit to arbitration in their individual capacities.

According to a previous Disputing blog post:

Meanwhile, Hobson filed a charge with the NLRB alleging her employer’s arbitration agreement violated the NLRA.  The NLRB agreed and issued a complaint against Murphy Oil over its purported unfair labor practice.  While the Alabama court case was stayed pending arbitral proceedings, the NLRB issued a decision stating the class-action waiver included in Murphy Oil’s binding arbitration agreement was unlawful.  The Board also directed the company to remove the provision from its employment contract.  Despite the majority’s rejection of contrary federal authority, two members of the NLRB disagreed with the Board’s written opinion in the case.

Next, Murphy Oil filed a petition for review with the nation’s Fifth Circuit. In response, the NLRB filed a motion seeking en banc review. The NLRB’s request sought to allow the Board to put forth arguments that the court’s 2013 decision in D.R. Horton, Inc., which stated class arbitration waivers are enforceable under the Federal Arbitration Act, should be overturned.  The Circuit Court refused the NLRB’s request and the case was instead considered by a three-judge panel.

While adhering to its prior ruling, The Fifth Circuit said:

The Board, reaffirming its D.R. Horton analysis, held that Murphy Oil violated Section 8(a)(1) of the NLRA by enforcing agreements that “requir[ed] . . . employees to agree to resolve all employment-related claims through individual arbitration.” In doing so, of course, the Board disregarded this court’s contrary D.R. Horton ruling that such arbitration agreements are enforceable and not unlawful. D.R. Horton, 737 F.3d at 362. Our decision was issued not quite two years ago; we will not repeat its analysis here. Murphy Oil committed no unfair labor practice by requiring employees to relinquish their right to pursue class or collective claims in all forums by signing the arbitration agreements at issue here. See id.

Murphy Oil argues that the Board’s explicit “defiance” of D.R. Horton warrants issuing a writ or holding the Board in contempt so as to “restrain [it] from continuing its nonacquiescence practice with respect to this [c]ourt’s directive.” The Board, as far as we know, has not failed to apply our ruling in D.R. Horton to the parties in that case. The concern here is the application of D.R. Horton to new parties and agreements.

An administrative agency’s need to acquiesce to an earlier circuit court decision when deciding similar issues in later cases will be affected by whether the new decision will be reviewed in that same circuit. See Samuel Estreicher & Richard L. Revesz, Nonacquiescence by Federal Administrative Agencies, 98 YALE L.J. 679, 735-43 (1989). Murphy Oil could have sought review in (1) the circuit where the unfair labor practice allegedly took place, (2) any circuit in which Murphy Oil transacts business, or (3) the United States Court of Appeals for the District of Columbia. 29 U.S.C. § 160(f). The Board may well not know which circuit’s law will be applied on a petition for review. We do not celebrate the Board’s failure to follow our D.R. Horton reasoning, but neither do we condemn its nonacquiescence.

Ultimately, the Fifth Circuit Court of Appeals granted Murphy Oil’s petition and held that the company “did not commit unfair labor practices by requiring employees to sign its arbitration agreement or seeking to enforce that agreement in federal district court.” In addition, the Court of Appeals upheld the NLRB’s order that the gasoline retailer take corrective action to ensure certain workers who signed an arbitration agreement understood that each retained their right to pursue any unfair labor practices claims with the NLRB.

Photo credit: Orin Zebest / Foter.com / CC BY