WASHINGTON -- 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.
The ruling from the 5th U.S. Circuit Court of Appeals overturns a National Labor Relations Board decision last year that found such agreements conflicted with federal law giving workers the right to pursue collective action to complain about workplace conditions.
The court'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. But it's a blow to workers who find it easier to band together when challenging the policies at a large company.
The case considered a policy in which D.R. Horton, a Fort Worth, Texas-based homebuilder, required all its employees to sign agreements to resolve any workplace disputes in individual arbitration proceedings rather than sue. The agreements prevented an arbitrator from granting relief to employees as a class or group.
In January 2012, the labor board ruled that the agreement violated worker's rights under the National Labor Relations Act. Federal law has long protected the right of workers to join together to protest workplace 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 ruled that such agreements must clarify that they do not waive an employee's right to file a complaint with the NLRB.
"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 who represented Horton.
Dozens of business groups, including the U.S. Chamber of Commerce, had protested the NLRB decision and filed briefs urging the appeals court to overturn it.
NLRB spokesman Gregory King said the agency is reviewing the decision. It could file an appeal to the U.S. Supreme Court.