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The National Labor Relations Board (“NLRB”) recently considered the issue of whether an employer is in violation of Section 8(a)(1) of the National Labor Relations Act (“NLRA”) when it requires employees covered by the NLRA, as a condition of their employment, to sign an agreement precluding them from filing joint, class or collective employment claims against the employer in any forum, whether in arbitration or in court.  Notwithstanding the federal policy favoring arbitration agreements, the NLRB held that such mandatory arbitration agreements unlawfully bar employees from engaging in “concerted activity” protected by Section 7 the NLRA.

In D. R. Horton, Inc. v. Michael Cuda, decided on January 3, 2012, D. R. Horton required its employees to execute a “Mutual Arbitration Agreement” (“MAA”) as a condition of their employment.  Pursuant to the MAA, all employment-related disputes had to be resolved through individual arbitration, waiving the right to a judicial forum.  In other words, each employee had to agree, as a condition of employment, that they would not pursue class or collective litigation of claims in any forum, arbitral or judicial.

In holding the MAA unlawful, the NLRB noted that Section 7 of the NLRA vests employees with a substantive right to engage in specified forms of associational activity.  Specifically, Section 7 provides that employees shall have the right to “engage in…concerted activities for the purpose of collective bargaining or other mutual aid or protection. . . .”  (emphasis added).  The NLRB reiterated its long-held position that this provision protects employees’ ability to join together to pursue workplace grievances, including through litigation.   As such, by prohibiting employees from bringing collective or class claims in any forum, “[t]he MAA thus clearly and expressly bar[red] employees from exercising substantive rights that have long been held protected by Section 7 of the NLRA.”