By Erin L. Kilgore and Scott D. Huffstetler

On Monday, a Fifth Circuit majority held that a class-action and collective action waiver was enforceable, regardless of whether or not the waiver was part of an arbitration agreement.  This is good news for employers in the Fifth Circuit who do not want to have mandatory arbitration agreements with employees, but do want to have safeguards in place to prevent class and/or collective actions.

The National Labor Relations Board (“NLRB”) has consistently determined that such waivers violate the National Labor Relations Act (the “Act”), particularly an employee’s right to engage in concerted activities for the purpose of mutual aid or protection.  According to the NLRB, the Act contemplates a right to participate in class and collective actions.

In this case, the NLRB determined that the employer violated the Act by requiring job applicants to sign, and then subsequently seeking to enforce, a class and collection action waiver, which was not contained in an arbitration agreement.  The employer sought review of the NLRB’s decision, and the Fifth Circuit found for the employer.

The Fifth Circuit previously rejected the NLRB’s position on such waivers, holding that the use of a class or collective action is procedural, not a substantive right, and the Act does not guarantee employees a substantive right to participate in class and/or collective actions.  See D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013).

On Monday, the court reaffirmed this precedent.  Although the court’s prior decision considered class and collective action waivers in the context of an arbitration agreement, the Fifth Circuit held that its precedent was not limited to arbitration agreements.  Thus, class action and collective actions waivers are enforceable in the Fifth Circuit, regardless of whether the waiver is contained in an arbitration agreement or other contract.

Employers with operations outside of the Fifth Circuit (Louisiana, Mississippi, and Texas) should be mindful that there are courts in other jurisdictions that may have reached different conclusions, and that the NLRB takes a position contrary to the Fifth Circuit.  All employers should stay tuned on this issue, as the Supreme Court may decide an arbitration matter this year, which could force reconsideration of the Fifth Circuit’s decision.

A copy of the Fifth Circuit’s decision can be found here.