Fifth Circuit Continues to Reject NLRB's Analysis of Mandatory Arbitration Agreements; NLRB Shows No Sign of Acquiescing | Practical Law

Fifth Circuit Continues to Reject NLRB's Analysis of Mandatory Arbitration Agreements; NLRB Shows No Sign of Acquiescing | Practical Law

In Murphy Oil USA, Inc. v. NLRB, the US Court of Appeals for the Fifth Circuit held that an employer did not commit unfair labor practices by requiring employees to sign arbitration agreements waiving their right to pursue class or collective claims. The court granted the employer's petition to review a decision by the National Labor Relations Board (NLRB) finding the agreements unlawful.

Fifth Circuit Continues to Reject NLRB's Analysis of Mandatory Arbitration Agreements; NLRB Shows No Sign of Acquiescing

by Practical Law Labor & Employment
Published on 04 Nov 2015 • USA (National/Federal)
In Murphy Oil USA, Inc. v. NLRB, the US Court of Appeals for the Fifth Circuit held that an employer did not commit unfair labor practices by requiring employees to sign arbitration agreements waiving their right to pursue class or collective claims. The court granted the employer's petition to review a decision by the National Labor Relations Board (NLRB) finding the agreements unlawful.
On October 26, 2015, in Murphy Oil USA, Inc. v. NLRB, the US Court of Appeals for the Fifth Circuit held that an employer did not commit an unfair labor practices (ULP) by requiring employees to sign arbitration agreements waiving their right to pursue class or collective claims. The court adhered to its prior ruling in D.R. Horton, Inc. v. NLRB (737 F.3d 344 (2013)) and granted Murphy Oil's petition for review. ( (5th Cir. Oct. 26, 2015).)

Background

Murphy Oil required employees, as a condition of employment, to sign arbitration agreements prohibiting them from filing class or collective actions for employment-related claims. An employee who had signed such an agreement filed an FLSA collective action in federal district court alleging several wage and hour violations. She also filed a ULP charge, alleging NLRA violations by Murphy Oil. (For more background on this matter, see Legal Update, NLRB Redoubles Stance that Mandatory Arbitration Clauses Waiving Employees' Rights to Pursue Class or Collective Actions Violate the NLRA.)
In 2012, in a separate matter, the panel (Board) heading the NLRB's judicial functions held that:
In December 2013, a majority of a Fifth Circuit panel found that:
In October 2014, when reviewing ULP charges about Murphy Oil's arbitration agreements, the Board declined to acquiesce to the Fifth Circuit's D.R. Horton decision, instead reaffirming its own D.R. Horton decision (Legal Update, NLRB Redoubles Stance that Mandatory Arbitration Clauses Waiving Employees' Rights to Pursue Class or Collective Actions Violate the NLRA).
Murphy Oil petitioned to the Fifth Circuit for review of the Board's Murphy Oil decision, in light of D.R. Horton.

Outcome

The Fifth Circuit:
  • Granted Murphy Oil's petition, adhering to its prior ruling in D.R. Horton.
  • Held that Murphy Oil did not commit any ULPs by requiring employees to sign arbitration agreements waiving their right to pursue class and collective actions.
  • Enforced the Board's order to the extent it held that the company's original arbitration agreement violated Section 8(a)(1) of the NLRA because an employee could reasonably interpret the original agreement as prohibiting the filing of ULP charges.
The Fifth Circuit noted that:
  • It previously held in D.R. Horton that arbitration agreements precluding employee class actions do not restrict NLRA Section 7 rights.
  • By holding Murphy Oil in violation of the NLRA, the Board declined to acquiesce to the Fifth Circuit's contrary D.R. Horton ruling. The Board is permitted to take that approach, but it should not expect different results when seeking enforcement of these types of decisions from the Fifth Circuit.
  • Several other sister circuits have indicated that they would agree with the Fifth Circuit's D.R. Horton holding.
The Fifth Circuit found that:
  • Murphy Oil did not commit any ULPs by requiring employees to sign arbitration agreements waiving their right to pursue class and collective actions, but the court did not condemn the Board's failure to acquiesce.
  • A lawful arbitration agreement does not require an express statement that an employee's right to file ULP charges remains intact; however the agreement cannot contain provisions that likely have a chilling effect on the employee's exercise of his rights.
  • Murphy Oil's original arbitration agreement could be reasonably construed to prohibit the filing of ULP charges.
  • Murphy Oil's revised arbitration agreement, which stated that the agreement would not preclude the filing and adjudication of ULPs, could not be reasonably construed to prohibit employees from filing ULP charges.
  • In contrast to Bill Johnson's Restaurants, in which an employer filed a lawsuit against its employees for the purpose of discouraging the employees seeking NLRB relief, Murphy Oil sought to defend itself against employee claims by filing a motion to dismiss the claims and attempting to enforce its arbitration agreement (461 U.S. 731 (1983)).
  • The Board was bold in holding that an employer following the court's D.R. Horton decision lacked basis in fact or law or had an illegal objective to do so.
  • The NLRB ought not be sanctioned for failing to comply with the Fifth Circuit's holding in D.R. Horton solely because of its actions in this case. There was no evidence that it failed to comply with that ruling as it applied to the parties of that case.

Practical Implications

In Murphy Oil, the Fifth Circuit declined to sanction the NLRB for its non-acquiescence to the Fifth Circuit's analysis in its D.R. Horton decision. The Board insists that arbitration agreements requiring a class action waiver are unlawful; the Fifth Circuit insists that they are not. Employers should expect the Board not to acquiesce to the Fifth Circuit's analysis. The Board likely hopes that another circuit court will view the law differently than the Fifth has, now twice. In the meantime, employers that face adverse Board decisions regarding mandatory arbitration clauses with waivers of class or collective actions should explore opportunities to file petitions for review in the Fifth Circuit.

UPDATE

In Epic Systems Corp. v. Lewis, the US Supreme Court held that arbitration agreements with class and collective action waivers are not prohibited under Section 7 of the NLRA and must be enforced as written under the Federal Arbitration Act (FAA). The decision affirmed the judgment in this case. (( (U.S. May 21, 2018); see Legal Update, SCOTUS: Arbitration Agreements with Class Action Waivers Must Be Enforced as Written, and NLRA Does Not Command Otherwise and Article, Expert Q&A on Class Action Waivers in the Employment Context.)