HR Management & Compliance

Court Questions Horton Decision in Light of D.C. Circuit Ruling

Properly executed arbitration agreements can prohibit employees from bringing Fair Labor Standards Act collective actions in some federal courts. This is despite a National Labor Relations Board decision holding that mandatory arbitration for employment disputes violates the National Labor Relations Act, a federal district court has ruled. In doing so, the court joined other courts in rejecting D.R. Horton Inc., 357 N.L.R.B No. 184 (Jan. 3, 2012) and has gone a step further, questioning the case’s validity in light of Noel Canning v. NLRB, No. 12-1115 (D.C. Cir., Jan. 25, 2013), which vacated D.R. Horton on procedural grounds.

The Southern District of New York case, Ryan v. JPMorgan Chase & Co., No. 12-cv-4844-vb (S.D.N.Y. Feb. 21, 2013), involved a former assistant branch manager of JP Morgan Chase Bank who sued for overtime pay under the FLSA and tried to pursue the action collectively.

However, upon Ryan’s employment she signed a binding arbitration affirmation that required her to submit all claims, including FLSA claims, to arbitration. She also agreed that arbitration would be on an individual basis only.

As a result, JPMorgan Chase moved to dismiss Ryan’s FLSA overtime claim, or, in the alternative, to compel arbitration of her claim on an individual basis based on the binding arbitration affirmation.

The court granted JPMorgan Chase’s motion, finding that: (1) the Federal Arbitration Act applies to the case and requires a favorable view of arbitration; (2) collective action waivers are not automatically unenforceable; and (3) the NLRB’s decision in D.R. Horton is unpersuasive and has questionable validity because of Noel Canning.

D.R. Horton Is Unpersuasive and Could Be Unconstitutional

One of Ryan’s arguments was that enforcing the arbitration agreement would violate the NLRA’s right to concerted activity, an argument endorsed by the NLRB in D.R. Horton. However, the court rejected D.R. Horton, agreeing with many other courts that the NLRA does not determine whether a plaintiff has a right to bring an FLSA collective action. The court also noted that the Court of Appeals for the District of Columbia Circuit recently vacated D.R. Horton because it was decided by a panel that had been appointed using unconstitutional methods (during Congress’ recess).

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