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Recent Federal Appeals Court Overrules NLRB's Mandatory Arbitration Ban

Submitted by Firm:
Cross, Gunter, Witherspoon & Galchus, P.C.
Firm Contacts:
Abtin Mehdizadegan, J. Bruce Cross, Misty Wilson Borkowski
Article Type:
Legal Update
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The Fifth Circuit Court of Appeals recently handed down a long-awaited opinion anticipated by many labor industry experts. The Fifth Circuit reversed the National Labor Relations Board's (NLRB) decision in D.R. Horton, Inc., finding that employers are in violation of the National Labor Relations Act (NLRA) by placing mandatory arbitration provisions in their employees' collective bargaining agreements, handbooks or other employment contracts. The NLRB has previously held that such a provision violates employees' rights to engage in "collective activity," which is a right under the NLRA.

In overruling the NLRB, the Fifth Circuit held that the Federal Arbitration Act (FAA) explicitly favors arbitration in employment and that Congress had not intended for the NLRA to overrule the FAA. Thus, mandatory arbitration provisions are not in violation of the NLRA. However, the Fifth Circuit's holding contains one important limitation: a mandatory arbitration provision, to be lawful under the NLRA, must state that employees are still free to file charges with the NLRB. Otherwise, according to the Court, employees could interpret the provision to limit their rights under the NLRA.