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NLRB Legal Arbitration Ruling Appealed

Monday, March, 12, 2012

In the landmark legal arbitration decision in D.R. Horton vs. Michael Cuda (Case 12–CA–25764), the NLRB declared that class action waivers in employee contracts were a violation of the employees' rights. This decision was declared by many to be in contradiction to the Supreme Court's ruling in AT&T vs. Concepcion. Now Horton vs. Cuda is being taken to the U.S. Court of Appeals for the Fifth Circuit in New Orleans, LA.


Comparing Employment Arbitration to AT&T vs. Concepcion


AT&T vs. Concepcion has been often cited by corporations as the precedent to keep class action waivers in contracts. In many cases, the Supreme Court has also referred to this decision as a model of enforcing the Federal Arbitration Act. However, there have been rulings, usually on the state level, that seemingly contradict the AT&T ruling.


Horton vs. Cuda was a different kind of contract arbitration case than AT&T vs. Concepcion. AT&T was a consumer contract issue, and Horton was an employment contract issue. Given that there is much more at stake than customer service in employment contracts, such clauses were deemed unconscionable. Drawing a line between consumer contracts and employment contracts in this way shows no conflict between the two cases.


The Federal Arbitration Act and NLRB Are Both Federal


Another significant difference between AT&T vs. Concepcion and Horton vs. Cuda is a question of relative authority. In the Concepcion case, it was a question of if the FAA had precedence over state law, and the decision was that it did. Consistently since then, the Supreme Court has held the stance that the FAA trumps state law.


The ruling in Horton vs. Cuda is not a matter of FAA versus state law. It is a question of if a federal law and a federal entity—the NLRB—are in conflict. Unfortunately, this way of defining legal arbitration is not nearly as straightforward as federal and state relations. This could be easily appealed all the way to the Supreme Court.