Thursday, April 12, 2012

Horton Hatches an Egg?

New ImageI've been noodling lately with Tim Glynn (and bothering the likes of  Rebecca White, Mike Zimmer, and Steve Willborn) about the significance of DH Horton for mandatory arbitration.  I've been around long enough to see a number of efforts fail to knock the Federal Arbitration Act off the top of the hill -- including the '91 Civil Rights Act, OWBPA, and, most recently, state unconscionability law. So it's not like I'm very optimistic about yet another effort.

Still, I'm pretty intrigued by Horton's conclusion that an employment agreement barring "joint, class, or collective claims . . . in any forum, arbitral or judicial" is a violation of the NLRA  for workers covered by the statute. And, whether or not, the Board is "right" on the law, the Supreme Court's deference doctrine should, at least in theory, require the Fifth Circuit to uphold its construction of the NLRA.  However, the courts have not been as deferential to the Board as maybe Chevron would require, and there's a joker in the deck anyway -- a court could defer to the Board on its interpretation of the NLRA but still find no deference due as to the FAA and the intersection of the two statutes.

HortonHatchesTheEggSo I'm far from predicting that this egg will actually hatch at the Fifth Circuit.    (For those who are wondering about the picture on the right, that's Horton the Elephant, star of Horton Hatches the Egg and the better known Horton Hears a Who.)

On the other hand, I've been wondering why the Fifth Circuit decision matters all that much. Of course, it will matter a lot to the parties because it will determine whether the employer was guilty of an unfair labor practice in the case before the Board.

But my point is that, if the Board is correct, that would mean that any contract which barred concerted activity in pursuit of legal rights was contrary to a federal statute and should not be enforced. Presumably, then, any court asked to stay a suit pending arbitration would have to decide whether the arbitration clause was valid to the extent it barred bringing claims collectively, and, in the process, should afford the Board whatever deference was appropriate.

Or is that right?  Does the party seeking release from such an agreement have to resort to the Board? This raises a question of primary jurisdiction. Or does it? After all, the Board has spoken on the principle, if not the application of the principle to the agreement before the court. And if there is a resort requirement, when does any unfair labor practice occur -- when the agreement is signed or when it's invoked to try to torpedo a class suit?

So far, the district courts have not been very receptive to such arguments, and even accepting them would raise a host of second order questions. But the reality remains that, regardless of the result in the Horton case itself, the challenge it poses may well arise in a number of other cases and may turn out to be the Court's next big arbitration issue in the employment context.  

Tim and I are probably going to tackle this shortly, and any thoughts would be appreciated.


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To answer the questions about timing, I would argue the extant law on unlawful rules. If the restrictions on class action and joinder violate 8(a)(1), the promulgation, maintenance, and enforcement all separarely violate the Act. See Lutheran Home of Livonia, 343 NLRB 646 (2004). The key here is that facially unlawful rules have been successfully attacked in the absence of enforcement with Court approval. See Guardsmark v. NLRB 475 F3d 369 (D.C. Cir. 2007). With that in mind, it would make more sense to institute NLRB proceedings first.

On the other hand, there has been some success of the NLRB in asking Courts to stay litigation where the object runs afoul of the Act. Think here about Bill Johnson violations, at least prior the BE&K. I could see this becoming necessary where a litigant may be running into a statute of limitations.

Posted by: Nick Ohanesian | Apr 13, 2012 11:39:39 AM

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