NLRB’s D.R. Horton Decision and Public Policy Cannot Undermine Concepcion – Morvant v. P.F. Chang’s China Bistro, Inc.

A Northern District of California judge has held that neither the National Labor Relations Board’s (“NLRB”) decision in  D.R. Horton, Inc., 357 N.L.R.B. No. 184 (January 3, 2012), nor the Norris-LaGuardia Act, 29 U.S.C. §§ 101 et seq., can change the Concepcion outcome.  And, attempting to distinguish the Supreme Court’s decision because it involved a preemption analysis and not the impact of federal statutes – didn’t work either.

In Morvant v. PF Chang’s China Bistro, Inc.pdf. (Case No. 4:11-CV-05405, N.D. Cal., May 7, 2012), District Judge Yvonne Gonzales Rogers was confronted with a putative class action alleging that P.F. Chang had failed to pay for missed meal and rest breaks, failed to pay all overtime compensation and to provide accurate wage statements as required by California law. 

After P.F. Chang’s filed a Motion to Compel individual arbitration based on its dispute resolution policy, the plaintiffs, former employees, Zachary Morvant and Jean Andrews, attacked the validity of the resolution policy on a number of grounds, including: (1) that class waivers in employment agreements are prohibited by the NLRB’s decision in D.R. Horton, Inc., (b) that the Norris-LaGuardia Act and its underlying policy further supported the D.R. Horton, Inc. decision, (c) that AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011), is distinguishable from their action and (d) that the class waiver provision prevents plaintiffs from acting as private attorneys general in violation of California Private Attorney General Act (“PAGA”).  Each of these challenges to individual arbitration was unsuccessful.

The NLRB’s D.R. Horton, Inc. Decision

In D.R. Horton, the NLRB held that the requirement of a class action waiver as a condition of employment was an unfair labor practice and violated Section 7 of the National Labor Relations Act (“NLRA”).  Accordingly, the plaintiff’s maintained that to enforce the arbitration agreement in the face of the D.R. Horton decision would violate public policy and be unenforceable under the savings clause of the Federal Arbitration Act (“FAA”) 9 U.S.C. § 2.  The analysis was premised on the argument that a contract contrary to public policy was an appropriate ground for invalidating the contract at law or equity as recognized by the FAA.

The District Judge ultimately concluded that the NLRA was not a bar to enforcement of agreements to arbitrate non-NLRA claims on an individual basis.  The court noted that the Concepcion opinion stated that “[r]equiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA.”  131 S. Ct. at 1748.  So, according to Judge Rogers, “the FAA requires not just compelling arbitration, but compelling arbitration on an individual basis in the absence of a clear agreement to proceed on a class basis.”

Is The Norris-LaGuardia Act Applicable?

Because the NLRB also relied on the Norris LaGuardia Act, the court examined its impact.  In doing so, the Court found that the NLRB’s interpretation of the Norris-LaGuardia Act was not entitled to deference and that the statute, which specifically applies only to “yellow-dog” contracts – not to join a union or to quit employment if an employee forms a union – was inapplicable.  Hence, the Norris-LaGuardia Act did not bar enforcement of the P.F. Chang agreement.

Concepcion Distinguishable?

Plaintiffs also attempted to distinguish Concepcion by arguing it was based on a preemption analysis and that the court in P.F. Chang was asked to consider federal statutes.  The District Court disposed of this argument in two ways.  First, while Concepcion focused on a preemption analysis “its statement of the meaning and purposes of the FAA applies equally in the context of determining which statute controls here.”  Second, “the Supreme Court’s post-Concepcion decision in CompuCredit v. Greenwood, 132 S. Ct. 665, 668-69 (2012), held that, absent a clear statement in a federal statute showing Congressional intent to override the use of arbitration, the FAA prevails.”

PAGA Waiver

Finally, the court found the contention that the arbitration agreement was invalid because it required a PAGA waiver, incorrect.  Plaintiff’s argument was based on California decision that had held claims for public injunctive relief could not be arbitrated.  But, in light of Concepcion, the Ninth Circuit held that the FAA preempted California’s state law prohibiting arbitration of claims for public injunctive relief.  See Kilgore v. Key Bank Nat. Ass’n, 673 F.3d 947, 965 (9th Cir. 2010).  Hence, the parties’ arbitration agreement must be enforced “even if this might prevent plaintiffs from acting as private attorneys general.”

What’s Left?

The Motion to Compel arbitration was granted as to Plaintiff Andrews but Morvant’s claims remained because he did not sign the arbitration agreement and nothing in it or the related materials stated that continued employment would constitute acceptance of the Company’s dispute resolution policy.

The Bottom Line:  Yet another lower federal court follows U.S. Supreme Court precedent despite the NLRB’s decision in D.R. Horton and Plaintiffs’ attempts to distinguish Concepcion based on its facts.