Fifth Circuit Rejects NLRB’s En Banc Hearing Request, Setting Up Likely Denial of Enforcement in Murphy Oil, USA 

In its 2012 decision in D.R. Horton, Inc., the National Labor Relations Board (NLRB) held that employers that require employees to agree to arbitrate employment-related claims, and to do so only on an individual basis, waiving the right to participate in class and collective action proceedings (in court or in arbitration), violate the guarantee in Section 7 of the National Labor Relations Act of employees’ right to engage in protected concerted activity for mutual aid or protection.  At bottom, the NLRB’s positon is that the right to engage in concerted activity, such as class action litigation, embedded the NLRA trumps the federal policy expressed in the Federal Arbitration Act favoring arbitration as a means to resolve disputes and requiring that arbitration agreements be enforced.

The NLRB’s position on class and collective waivers, however, has been soundly and repeatedly rejected by the federal and state courts.  Indeed, on appeal, the Fifth Circuit Court of Appeals denied enforcement of the Board’s decision in D.R. Horton (see our post here).

Most expected that the NLRB would appeal its defeat in D.R. Horton to the United States Supreme Court, which has over the past several terms addressed a number of arbitration-related cases (i.e., AT&T Mobility v. Concepcion; Oxford Health v. Sutter; Stolt-Nielsen v. Animalfeeds Int’l).  However, rather than seeking a the final word from the Supreme Court on the issue, the NLRB declined to seek review and instead issued a second decision, Murphy Oil USA, Inc., in which the NLRB attempted to rehabilitate D.R. Horton and address the shortcomings therein identified by many courts, including the Fifth Circuit (see our post here).

Predictably, after the NLRB found that it violated the law by implementing an arbitration agreement with a class and collective action waiver – which the Fifth Circuit (and other circuits) had held was lawful – Murphy Oil appealed the NLRB’s decision to, not surprisingly, the Fifth Circuit.

Under the principal of horizontal stare decisis, one panel of a circuit court of appeals may not overrule a prior panel’s decision.  Rather, any change to precedent from a prior panel decision must come as a result of a decision issued by all of the judges in the circuit through what is referred to as an en banc proceeding.  As the NLRB recognized that it could not win in Murphy Oil unless the Fifth Circuit decided to hear the matter en banc (that is, a panel in Murphy Oil could not find the class and collective action waiver in that case unlawful, as to do so would require that the panel effectively overrule the prior panel’s decision in D.R. Horton), it petitioned for the full court to hear the case.

On June 24, the Fifth Circuit denied the NLRB’s petition for hearing en banc.  In fact, it emphatically did so – no judge on the court even asked that the court be polled on whether to hear the case en banc.

What does this mean?  Practically speaking, it means that it should be a mere formality for the Fifth Circuit to grant review and deny enforcement of the Board’s Order in Murphy Oil, meaning that the NLRB will once again lose before that court.  Then it will be up to the NLRB – for the second time – to decide whether to seek Supreme Court review.  Hopefully, for the sake of everyone involved – employers and employees alike – it will do so this time, and thereby seek to resolve this issue, rather than continue to blindly charge employers with unfair labor practices based on a theory that has been rejected by every judge and court to have considered it.