December 4, 2013

Appeals court sides with D.R. Horton on arbitration

An appellate panel overturns a National Labor Relations Board decision that the home builder violated federal law by forcing all employees to sign an arbitration agreement.

Employers can require their workers to sign arbitration agreements waiving all rights to class-action lawsuits over workplace grievances, a federal appeals court ruled Tuesday in a case involving Fort Worth-based D.R. Horton.

The ruling from the 5th U.S. Circuit Court of Appeals overturns a National Labor Relations Board decision last year that such agreements conflict with federal law giving workers the right to pursue collective action to complain about work conditions.

Tuesday’s ruling is a win for businesses that want to limit legal exposure from the rising cost of class-action lawsuits over unpaid overtime and other wage violations. And it’s a blow to workers who find it easier to band together when challenging policies at a large company.

The case considered a policy in which home builder D.R. Horton required all its employees to sign agreements to resolve workplace disputes in individual arbitration proceedings rather than through courts. The agreements were challenged by Michael Cuda, a superintendent from July 2005 to April 2006, who said Horton misclassified him and other superintendents as exempt from overtime pay.

In January 2012, the labor board ruled that the agreement violated worker rights under the National Labor Relations Act. Federal law has long protected the right of workers to join together to protest work conditions, including through litigation.

The board said the agreements also misled employees into thinking they could no longer file unfair labor charges with the board.

The appeals court panel, in a 2-1 decision, agreed with D.R. Horton, ruling that arbitration agreements containing class-action waivers are enforceable under the Federal Arbitration Act. But the court said such agreements must clarify that they do not waive an employee’s right to file a complaint with the labor board.

“This is an enormous victory for employers as they attempt to prevent the ongoing onslaught of class-action lawsuits,” said Ron Chapman, a Dallas-based attorney for D.R. Horton.

Dozens of business groups, including the U.S. Chamber of Commerce, had protested the labor board’s decision and filed briefs urging the appeals court to overturn it.

Board spokesman Gregory King said the agency is reviewing the decision. It could appeal to the Supreme Court.

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