The Fifth Circuit Court of Appeals (the federal appeals court with jurisdiction over Texas) struck a blow to the National Labor Relations Board’s attempt to outlaw mandatory class action waivers for employees. On December 3, 2013 the Court over-ruled the NLRB’s decision involving homebuilder D.R. Horton, and concluded that the company did not violate the law by requiring employees to sign arbitration agreements which gave up the right to file a class action. The full decision can be found here.
This decision opens the door for the use of arbitration agreements as a method of avoiding costly wage and hour collective actions. Although some employers may not want to give up the right to a jury trial in all cases, like discrimination or harassment, there is nothing preventing the use of an arbitration agreement limited to wage and hour claims. In fact, our Cozen team has helped many companies implement such agreements which require employees to first bring payroll disputes to the Human Resources Department, followed by mandatory mediation, and, lastly, binding arbitration with no option for a class action. By taking wage and hour claims out of the court house and eliminating class actions, much of the legal risk of these claims can be avoided.