Tag Archives: Section 7

December 3, 2013

Divided Fifth Circuit Overturns D.R. Horton on Enforceability of Employer’s Arbitration Agreement Prohibiting Class Claims

By Jeffrey T. Johnson 

In a much-anticipated decision, the Fifth Circuit Court of Appeals rejected the National Labor Relations Board’s controversial D.R. Horton decision, which held that an arbitration agreement requiring an employee to waive his or her right to bring class claims violated the National Labor Relations Act (NLRA).  Agreeing with its sister circuit courts, the Fifth Circuit held that the NLRA did not override the Federal Arbitration Act (FAA) meaning the employer’s arbitration agreement must be enforced according to its terms, including the agreement’s preclusion of class claims.  D.R. Horton, Inc. v. NLRB, No. 12-60031 (5th Cir. Dec. 3, 2013).  The Court upheld, however, the NLRB’s finding that the arbitration agreement could be misconstrued by employees as precluding the filing of unfair labor practice charges which violates Section 8(a)(1) of the NLRA. 

Arbitration Agreement Prohibiting Class Claims Does Not Violate NLRA 

The Fifth Circuit’s ruling puts to rest a thorny issue for employers who have struggled with the Board’s D.R. Horton decision.  The controversy arose in early 2012 when the NLRB concluded that home builder D.R. Horton violated Sections 7 and 8(a)(1) of the NLRA by requiring employees to sign a Mutual Arbitration Agreement that precluded employees from filing class or collective claims related to their wages, hours or other working conditions. In re D.R. Horton, Inc., 357 NLRB No. 184 (Jan. 3, 2012).  The Board found that the agreement interfered with the exercise of employees’ substantive rights under Section 7 of the NLRA which allows employees to act in concert with each other for their mutual aid or protection.  

Two of the three judges on the Fifth Circuit panel disagreed.  First, the majority found that the use of class action procedures is not a substantive right but is instead a procedural device.  Then, the judges analyzed whether there is a conflict between the NLRA and the FAA that would preclude application of the FAA to enforce the arbitration agreement according to its terms.  Relying on the U.S. Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011), the Fifth Circuit determined that requiring a class mechanism is an impediment to arbitration and violates the FAA so the Board’s attempt to fit its rationale into the FAA’s “savings clause” failed.  The Court then concluded that neither the NLRA’s statutory text nor its legislative history contains a congressional command to override the FAA.  Failing to find an inherent conflict between the NLRA and the FAA, the Court ruled that the arbitration agreement must be enforced according to its terms under the FAA. 

The Fifth Circuit pointed out that every one of its sister circuits to consider this issue had refused to defer to the NLRB’s rationale in D.R. Horton, and had held arbitration agreements containing class waivers enforceable.  The two judges in the majority stated, “we are loath to create a circuit split.”  Judge Graves dissented, stating that he agreed with the Board that the arbitration agreement interfered with the exercise of employees’ substantive rights under Section 7 of the NLRA. 

Agreement Violates NLRA Because Employees Might Believe it Prohibits Filing Unfair Labor Practice Charges 

The arbitration agreement used by D.R. Horton required that employees agree to arbitrate “without limitation[:] claims for discrimination or harassment; wages, benefits, or other compensation; breach of any express or implied contract; [and] violation of public policy.”  Although the agreement provided four exceptions to arbitration, none of the exclusions referred to unfair labor practice charges.  All three judges found that this could create a reasonable belief that employees were waiving their administrative rights, including the right to file unfair labor practice charges under Section 8(a)(1) of the NLRA.  Therefore, the Court enforced the Board’s order that D.R. Horton violated Section 8(a)(1) because an employee would reasonably interpret the arbitration agreement as prohibiting the filing of a claim with the Board, validating the need for D.R. Horton to take the ordered corrective action. 

Challenges to Composition of the Board Rejected 

While this case was on appeal to the Fifth Circuit, the D.C. Circuit issued its Noel Canning decision which vacated an order of the three-member panel of the Board by ruling that recess appointments of the panel members were invalid.  Noel Canning v. NLRB, 705 F.3d 490 (D.C.Cir. 2013) cert. granted 133 S.Ct. 2861 (U.S. June 24, 2013)(No. 12-1281).  Because the panel that decided the D.R. Horton case included a member appointed by recess appointment, the Fifth Circuit asked the parties to submit briefs on whether it must consider the constitutionality of the recess appointments.  The Court ultimately decided it need not consider the issue, finding that it retained jurisdiction to resolve the dispute at hand and leaving it to the U.S. Supreme Court to decide the constitutionality of the Board’s recess appointments.  The Fifth Circuit also rejected D.R. Horton’s challenges that Board Member Becker’s recess appointment expired before the Board issued its decision, and that the Board had not been delegated authority to act as a three-member panel. 

Favorable Result for Employers 

Although there are pros and cons to using arbitration agreements in the employment context, today’s ruling by the Fifth Circuit (absent review by the Supreme Court) removes the impediment to incorporating class action waivers in employment arbitration agreements.  The decision reinforces, however, that certain language within an arbitration agreement may violate the NLRA if it is reasonably seen as limiting an employee’s right to file an unfair labor practice charge.  Employers should consult with employment counsel to review whether arbitration agreements are appropriate for their workforce, and if so, to ensure the wording of the agreement is enforceable.

Disclaimer: This article is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal advice and are not intended to create an attorney-client relationship between you and Holland & Hart LLP. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.

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August 20, 2013

NLRB Judge Strikes Down Employer’s Dress Code Following “Slave” Shirt Discipline

By Brian Mumaugh 

What is wrong with an employer’s dress code that prohibits clothing that displays vulgar or obscene phrases, remarks or images which may be racially, sexually or otherwise offensive as well as clothing that displays words or images that are derogatory to the Company?  It is overly broad and interferes with employees’ Section 7 rights under the National Labor Relations Act (NLRA or Act) to engage in union and/or protected concerted activity, according to an Administrative Law Judge (ALJ) for the National Labor Relations Board (NLRB).  The ALJ’s review of the dress code came after the employer disciplined an employee who wore a T-shirt with the word “slave” on it next to a picture of a ball and chain and the employee’s time clock number. Dismissing the employer’s argument that the shirt would be racially offensive to visitors who toured its facility, the ALJ found that the employer violated the Act by sending the employee home without pay to change his “slave shirt.” 

The History of the “Slave Shirt” 

Mark Gluch was a long time employee of automotive parts manufacturer Alma Products Company and a vigorous supporter of the union representing his bargaining unit.  The 2012 incident that gave rise to this case occurred when Gluch wore the “slave shirt” to work during a period of contentious negotiations for a new union contract.  The origin of the shirt, however, dated back to 1993 when company employees developed and paid for the “slave shirts” to send the company a message during an earlier round of difficult contract negotiations.  The shirts resurfaced in 1996 when the bargaining unit employees wore them while picketing during a strike.  Immediately following the strike, as many as 30% of the unit employees wore the “slave shirts” to work on any given Friday.  No discipline or policy infraction was noted or enforced at that time. 

Company Seeks to Avoid Racially Offensive Shirt 

When a new president and CEO, Alan Gatlin, took over for Alma Products in 2005, he noticed employees wearing the “slave shirt.” Finding the shirts to be racially offensive, he felt embarrassed that customers and visitors to the facility would see employees wearing the shirt and be offended.  He testified that in his view, the shirts did not reflect well on the Company with customers as they tried to get new business.  Gatlin asked the human resources manager to draft a dress code policy which was implemented in early 2006.  The dress code policy did not specifically reference the “slave shirt” but included general prohibitions against clothing that displayed “vulgar/obscene phrases, remarks or images which may be racially, sexually or otherwise offensive and clothing displaying words or images derogatory to the Company . . .”  The policy also stated “[i]f you are uncertain whether an article of clothing is appropriate under this policy, follow the old adage of better safe than sorry and refrain from wearing it at work.”


After implementing the dress code in 2006, it appears that employees seldom wore the “slave shirt” to work.  However, during difficult union contract negotiations in April 2012, Gluch and other employees began wearing pro-union shirts and pins and Gluch wore the “slave shirt” to work.  Gluch’s supervisor gave Gluch the option of removing the shirt or turning it inside out so that the writing would not be visible.  When Gluch refused to do so, he was sent home without pay for wearing the shirt. 

ALJ Rejects Company’s Concerns About Racial Discrimination 

The union filed an unfair labor practice charge claiming, among other things, that the policy and the Company’s enforcement of the policy, violated the Act.  The Company argued that the shirt’s “slave” reference was offensive to African-Americans due to the history of slavery in the United States.  Noting that an important buyer from Chrysler was African-American as was a new production supervisor at the facility, the Company asserted that it was entitled to discipline Gluch for wearing the racially offensive shirt.  The ALJ rejected this argument, stating that the NLRB has repeatedly found employees to be protected even when they displayed messages that likened their working conditions to those of a slave.  The ALJ noted that the dictionary definition of “slave” does not reference race, but instead focuses on the condition of servitude or being subject to a person or influence.  In addition, given the shirt’s history that it had been worn to work over the past two decades as support for the union, the ALJ determined that it would not be seen as carrying a racial message.  Moreover, the Company had a policy prohibiting racial discrimination since the 1990s, yet had failed to take any action to prohibit wearing the “slave shirt” as racially offensive prior to Gluch’s wearing of the shirt in 2012.  

Key to the ALJ’s analysis of the dress code policy was its general prohibition of words or images that are derogatory to the Company.  The ALJ found that the policy interfered with employees’ Section 7 activity, such as protected statements to coworkers, supervisors or third parties who deal with the Company, because it would prohibit employees from objecting to their working conditions and seeking the support of others in improving them.  The dress code policy was found to be unlawfully overbroad because it prohibits all communications derogatory to the company regardless of whether the words are racially or sexually discriminatory or are protected as concerted activities under the National Labor Relations Act.  In addition, by directing employees to be “safe” not “sorry,” the ALJ stated that the policy directs employees to construe the prohibition on derogatory comments such that it prohibits Section 7 activity. 

Dress Code Policies That Do Not Restrict Section 7 Activity 

With the NLRB (and its ALJs) striking down a variety of employer policies relating to both union and non-union employees, it is difficult to draw a bright line to determine which policies pass scrutiny and which do not.  That said, employers can learn lessons from this recent decision that may help keep their dress code policy away from NLRB review.  First, use specific examples of acceptable versus unacceptable attire rather than general statements that require interpretation.  Second, if your workplace warrants different dress standards for different segments of employees (e.g., public-facing employees vs. behind the scenes employees), make those standards clear and justified by business necessity.  Third, if you include a statement that prohibits derogatory words or images on clothing, include a statement that communications protected by Section 7 are permissible under the dress code.  Finally, enforce your policy in a uniform and consistent manner, so that all dress code violations are treated similarly regardless of the employee or supervisor involved.

Disclaimer:This article is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal advice and are not intended to create an attorney-client relationship between you and Holland & Hart LLP. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.

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June 22, 2012

NLRB’s New Website

The U.S. Department of Labor received much fanfare when it rolled out its new timesheet app.  In its news release of 2011 (http://www.dol.gov/opa/media/press/whd/WHD20110686.htm), DOL indicated that it believed the application would ensure that workers received the wages to which they were entitled. 

Not to be outdone, although not as an application, the National Labor Relations Board announced that it has launched a new interactive website to describe the rights of employees to engage in protected concerted activity under Section 7 of the National Labor Relations Act.  The webpage can be found at:  http://www.nlrb.gov/concerted-activity

You will see that the NLRB details numerous case examples where it found the conduct of employers to violate the act.  The interactive map serves to lead the reader to the detail of a case that provides factual detail about the violation.  This is just another example of how the social media network can be used as a public relations effort to justify an agency's public purpose and to inform employees of their rights. 

For more information on the NLRB or other traditional labor relations questions, feel free to send a comment or reach me directly.

Steven M. Gutierrez