D.R. Horton, Inc. v. National Labor Relations Board
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Full Opinion
The National Labor Relations Board held that D.R. Horton, Inc. had violated the National Labor Relations Act by requiring its employees to sign an arbitration agreement that, among other things, prohibited an employee from pursuing claims in a collective or class action. On petition for review, we disagree and conclude that the Boardâs decision did not give proper weight to the Federal Arbitration Act. We uphold the Board, though, on requiring Horton to clarify with its employees that the arbitration agreement did not eliminate their rights to pursue claims of unfair labor practices with the Board.
FACTS AND PROCEDURAL HISTORY
Horton is a home builder with operations in over twenty states. In 2006, Horton began requiring all new and existing employees to sign, as a condition of employment, what it called a Mutual Arbitration Agreement. Three of its provisions are at issue in this appeal. First, the agreement provides that Horton and its employees âvoluntarily waive all rights to trial in court before a judge or jury on all claims between them.â Second, having waived their rights to a judicial proceeding, Horton and its employees agreed that âall disputes and claimsâ would âbe determined exclusively by final and binding arbitration,â including claims for âwages, benefits, or other compensation.â Third, Horton and its employees agreed that âthe arbitrator [would] not have the authority to consolidate the claims of other employeesâ and would ânot have the authority to fashion a proceeding as a class or collective action or to award relief to a group or class of employees in one arbitration proceeding.â
These provisions meant that employees could not pursue class or collective claims
Michael Cuda worked for Horton as a superintendent from July 2005 to April 2006; he signed a Mutual Arbitration Agreement. In 2008, Cuda and a nationwide class of similarly situated superintendents sought to initiate arbitration of their claims that Horton had misclassified them as exempt from statutory overtime protections in violation of the Fair Labor Standards Act (âFLSAâ). Horton responded that the arbitration agreement barred pursuit of collective claims, but invited Cuda and the other claimants to initiate individual arbitration proceedings. Cuda then filed an unfair labor practice charge, alleging that the class-action waiver violated the National Labor Relations Act (âNLRAâ).
On January 3, 2011, an administrative law judge held that the Mutual Arbitration Agreement violated Sections 8(a)(1) and (4) of the NLRA
DISCUSSION
.This court will uphold the Boardâs decision âif it is reasonable and supported by substantial evidence on the record considered as a whole.â Strand Theatre of Shreveport Corp. v. NLRB, 493 F.3d 515, 518 (5th Cir.2007); see also 29 U.S.C. § 160(e). âSubstantial evidence is such relevant - evidence as a reasonable mind would accept to support a conclusion.â J. Vallery Elec., Inc. v. NLRB, 337 F.3d 446, 450 (5th Cir.2003) (quotation marks omitted). In light of the Boardâs expertise in labor law, âwe will defer to plausible inferences it draws from the evidence, even if we might reach a contrary result were we deciding the case de novo.â Id. This deference. extends to both the Boardâs âfindings of facts and its application of the law.â Id. While the Boardâs legal conclusions are reviewed de novo, Strand, 493 F.3d at 518, its interpretation of the NLRA will be upheld âso long as it is rational and. consistent with the Act.â Litton Fin. Printing Div., a Div. of Litton
J. Issuesâ Regarding Composition of Board
A. Validity of Recess Appointment of Board Member
Late in the process for our review of these rulings, a sister circuit issued an opinion that, were we to adopt its reasoning, might result in our holding that the Boardâs rulings are of no effect because one of its members was improperly appointed. See Noel Canning v. NLRB, 705 F.3d 490 (D.C.Cir.2013), cert. granted â U.S.-, 133 S.Ct. 2861, 186 L.Ed.2d 908 (U.S. June 24, 2013) (No. 12-1281).
The court also addressed whether the vacancies were invalid because they did not âhappenâ during a Senate recess. Id. Examining different possible definitions of âhappen,â the court held that a vacancy happens âonly when it first arises, demonstrating that the Recess Appointments Clause requires that the relevant vacancy arise during the recess.â Id. Consequently, the court held that the appointments were also invalid because the vacancies pre-existed the recess in which the appointments were made. Id. at 514.
Although Noel Canning is not binding on this court, it calls into question the constitutionality of Member Beckerâs recess appointment and the resulting validity of the Boardâs order. Horton, though, has never challenged the constitutionality of Member Beckerâs appointment. It has argued instead that Member Beckerâs appointment expired before the decision was issued. In light of Noel Canning, we asked the parties to submit new briefing regarding whether, for jurisdictional reasons,' we must consider the constitutionality of Member Beckerâs appointment. We conclude that we do not.
First, the NLRAâs jurisdictional statement supports the conclusion that we are not deprived of appellate jurisdiction because of defects in a Board order:
The Board shall have power to petition any court of appeals of the United States ... for the enforcement of such order.... Upon the filing of such petition, the court.... shall have jurisdiction of the proceeding and of the ques*351 tion determined therein, and shall have power ... to make and enter a decree enforcing, modifying and enforcing as so modified, or setting aside in whole -or in part the order of the Board.
29 U.S.C. § 160(e) (emphasis added). This courtâs jurisdiction is derived from the Boardâs filing of a petition, not from the validity of the Boardâs underlying decision.
Second, challenges under the Appointments Clause are ânonjurisdictional structural constitutional objectionsâ that are within a courtâs discretion to consider. Freytag v. Commissioner, 501 U.S. 868, 878-79, 111 S.Ct. 2631, 115 L.Ed.2d 764 (1991). In Freytag, the Supreme Court considered a belated challenge to a special trial judgeâs appointment, but made clear that doing so was a discretionary exercise appropriate only in ârare cases.â Id. at 879, 111 S.Ct. 2631. Applying that decision, both the Sixth and the Eighth Circuits have determined that challenges to the Boardâs composition are nonjurisdic-tional. See NLRB v. RELCO Locomotives, Inc., 734 F.3d 764, 793-96 (8th Cir. 2013); GGNSC Springfield LLC v. NLRB, 721 F.3d 403, 406-07 (6th Cir.2013); see also Intercollegiate Broad. Sys., Inc. v. Copyright Royalty Bd., 574 F.3d 748, 755-56 (D.C.Cir.2009) (declining to consider constitutional challenge to copyright royalty judgesâ appointment).
Third, the Noel Canning court itself did not hold that the constitutional issues implicated subject matter jurisdiction. Rather, it first resolved the appellantâs statutory arguments. See Noel Canning, 705 F.3d at 493. Had the court considered the appellantâs constitutional arguments as affecting the courtâs jurisdiction, it would have had to consider those arguments first before ruling on the merits of the petition. See Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94-95, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998) (providing federal courts must resolve issues of subject matter jurisdiction before considering merits of a lawsuit).
Accordingly, the validity of Member Beckerâs recess appointment is not a matter we must address for jurisdictional reasons. It also is not an issue presented to us in the initial briefing. Further, a circuit-split now exists. See Noel Canning, 705 F.3d at 509. We find that the D.C. Circuit has explored the relevant sources, leaving little for us to add to the percolation of the issue other than to declare which side of the split we take. Finally, as our analysis will reveal, answering this newly-raised question would have only a marginal effect on this case. We leave the constitutional issue for the Supreme Court.
B. Expiration of Board Memberâs Recess Appointment
Horton contends that Member Beckerâs recess appointment expired before the Board issued its decision, which left the Board without authority to act because it lacked the necessary quorum of three members.
The terms of those serving under recess appointments expire at the end of the next Senate session after the appointment. U.S. Const, art. II, § 2, cl. 3. The President appointed Member Becker on March 27, 2010, during the second session of the 111th Congress. Accordingly, if Member Becker was validly appointed, his term expired at the end of the first session of the 112th Congress.
Horton argues that the session ended when the Senate adjourned on December 17, 2011 or, alternatively, when it held its last pro forma session on December 30, 2011. Either date would mean that Member Beckerâs appointment expired before the Board issued its decision on January 3, 2012.- A simple adjournment, though, does not end a session. The end of a session is caused either by the affirmative act of the Senateâs adjourning sine die
Whether the Boardâs decision was entered prior to noon is unclear from the record. This time-of-day question is supported by very little argument in the briefing and no evidence in the record. If the order was effectively entered in the afternoon after the next congressional session had begun, a new issue would arise. Nonetheless, because of the state of the record and the briefing, we consider the absence of proof about exactly when on January 3 the Board acted to constitute a waiver of the issue.
We rely, to this limited extent only, on the de facto officer doctrine. The Supreme Court has summarized the doctrine by saying it âconfers validity upon acts performed by a person acting under the color of official title.even though it is later discovered that the legality of that personâs appointment or election to office is deficient.â Ryder v. United States, 515 U.S. 177, 180, 115 S.Ct. 2031, 132 L.Ed.2d
We think that one who makes a timely challenge to the constitutional validity of the appointment of an officer who adjudicates his case is entitled to a decision on the merits of the question and whatever relief may be appropriate if a violation indeed occurred.
Id. at 182-83, 115 S.Ct. 2031.
The timely challenge here was that Member Beckerâs appointment expired long before January 3. We have resolved that issue. Absent more being made of the contingencies that apply to January 3 itself, we conclude that no timely challenge to that aspect of the appointment has been presented.
We do not imply a similar conclusion about the relevance of the de facto officer doctrine to the more fundamental Appointments Clause issues addressed in Noel Canning which we have concluded need not be addressed today. We apply the doctrine here very much on the margins of the issue. Those margins are an unraised, specific issue that after all the presentation the parties desired to bring to the question, has no factual support nor meaningful legal argument.
The Board issued its decision within Member Beckerâs recess term, and Hortonâs argument that the Board lacked a quorum is without merit.
C. Delegation of Authority to Three-Member Panel
Horton also argues that the Board lacked authority to issue its decision because it had not been delegated authority to act as a three-member panel. âThe Board is authorized to delegate to any group of three or more members any or all of the powers, which it may itself exercise.â 29 U.S.C. § 153(b). The statute further states that âthree members of the Board shall, at all times, constitute a quorum of the Board, except that two members shall constitute a quorum of any group designated pursuant to [the delegation clause].â Id.
Under Section 153(b), four members of the Board can properly delegate authority to a three-member panel, and two members of that panel may decide a case âif, for example, the third member had to re-cuse himself from a particular matter.â New Process Steel, L.P. v. NLRB, 560 U.S. 674, 130 S.Ct. 2635, 2639, 177 L.Ed.2d 162 (2010). In New Process Steel, the issue was whether a four-member Board could delegate authority to three of its members, intending that when two of its membersâ recess appointments expired, the remaining two members could carry on the Boardâs business. Id. at 2638. The Court held that the statute required that the group consist of three members for the duration of the delegation. Id. at 2640. It is clear, then, that the Board could validly issue its decision through two of its members, provided that the Board delegated authority to a three-member panel and that such a panel still existed when the two members acted:
Though there is no other explicit statutory description of the mechanics of a delegation, âthe Board quorum requirement and the three-member delegation clause should not be read as easily surmounted technical obstacles of little to no import.â Id. at 2644. Horton argues that such a delegation did not occur, as there is no order or other, evidence of an express delegation. â No authority is cited explaining how the requisite delegation is to be made. One. amici, the Council on Labor Law
Regardless of how a delegation of authority is achieved or recognized, no party or amicus has provided authority that an express, written delegation is required before a three-member panel may-act. Despite the Supreme Courtâs language in New Process Steel that delegation should not be treated as an inconsequential technical matter, we will not establish for the first time that an express order is required. There is no indication that the Board deviated from its - customary practice of delegating authority to the three-member panel and allowing two members to decide the case when Member Hayes recused. We conclude it is particularly inappropriate to require an express delegation here because the Board only had three members. An express delegation would have been by three members to themselves as three members. We will infer that when the entire three-member Board decided to act, it gave itself authority to act as three members. On these facts, an express delegation would have been a semantical tying up of loose ends, without significance.
It might well be a good practice that the Board not treat delegation as an inconsequential technical matter and establish some practice for delegation. Such a practice might avoid a contrary ruling one day by a court.
II. Pending Motions
Another preliminary matter involves the composition of the record on appeal. While its petition was pending, Horton moved that this court take judicial notice of the arbitration demand Cuda submitted to the American Arbitration Association and Cudaâs letter to the Boardâs Regional Director, seeking to withdraw his unfair labor practice charge. In the alternative, Horton asked the court to supplement the record with the withdrawal letter. The Board opposed Hortonâs motion, and moved to strike references to these documents in Hortonâs brief and require Horton to file a corrected brief. This court ordered these cross-motions carried with the case.
On April 8, 2008, Cuda, through his attorney, submitted an arbitration demand as a single plaintiff, not as a member of a purported class. Cudaâs attorney later sent a letter to the Boardâs Regional Director, stating that he âwould like to withdraw the charge filed againstâ Horton. Hortonâs interest in these documents stems from its belief that the Boardâs decision created the novel presumption that âan individual who files a class or collective action complaint or arbitration demand necessarily seeks to initiate group action with others.â According to Horton, the Boardâs decision conflicts with the âprocedural historyâ of the case because Cudaâs arbitration demand named him as a single plaintiff and his withdrawal letter referred only to himself.
This court has âgenerally declined to supplement the appellate record with materials not presented to the district court, though [it has] the discretion to do so.â Bd. of Miss. Levee Commârs v. EPA, 674 F.3d 409, 417 n. 4 (5th Cir.2012). It is
We decline to take judicial notice of these documents or supplement the record. Because Hortonâs appellate brief contains only insignificant references to these documents, we decline to order Horton to file a corrected brief as requested by the Board.
III. NLRA Sections 7 & 8(a)(1) and the Federal Arbitration Act
The Board concluded that Horton violated Sections 7 and 8(a)(1) of the NLRA by requiring its employees to sign the Mutual Arbitration Agreement, which âprecludes them from filing joint, class, or collective claims addressing their wages, hours or other working conditions against the employer in any forum, arbitral or judicial.â In reaching this conclusion, the Board first determined that the agreement interfered with the exercise of employeesâ substantive rights under Section 7 of the NLRA, which allows employees to act in concert with each other;
Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection, and shall also have the right to refrain from any or all of such activities except to the extent that such right may be affected by an agreement requiring membership in a labor organization as a condition of employment as authorized in section 158(a)(3) of this title.
29 U.S.C. § 157 (emphasis added). The Board deemed it well-settled that the NLRA protects the right of employees to improve their working conditions through administrative and judicial forums.
Taking this view of Section 7, the Board held that the NLRA protects the right of employees to âjoin together to pursue workplace grievances, including through litigationâ and arbitration. The Board concluded that an âindividual who files a class or collective action regarding wages, hours or working conditions, whether in court or before an arbitrator, seeks to initiate or induce group action and is engaged in conduct protected by Section 7 ... central to the [NLRAâs] purposes.â In the Boardâs opinion, by requiring employees to refrain from collective or class claims, the Mutual Arbitration Agreement infringed on the substantive rights protected by Section 7.
The other statutory component of the Boardâs analysis is Section 8(a)(1) of the NLRA. It defines unfair labor practices by an employer: âIt shall be ah unfair labor practice for an employer-(l) to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in section 157 of this title....â 29 U.S.C. § 158(a). In light of the Boardâs interpretation of Section 7, it held that Horton had committed an unfair labor practice under Section 8 by requiring employees to agree not to act in concert in administrative and judicial proceedings.
We give to the Board âjudicial deference when it interprets an ambiguous provision of a statute that it administers.â Lechmere, Inc. v. NLRB, 502 U.S. 527, 536, 112 S.Ct. 841, 117 L.Ed.2d 79 (1992). â[T]he task of defining the scope of § 7 is for the Board to perform in the first instance as it considers the wide variety of cases that come before it....â NLRB v. City Disposal Sys., Inc., 465 U.S. 822, 829, 104 S.Ct. 1505, 79 L.Ed.2d 839 (1984) (quotation marks omitted). Where âan issue ... implicates its expertise in labor relations, a reasonable construction by the Board is entitled to considerable deference.â Id. âDeference to the Board âcannot be allowed to slip into a judicial inertia which results in the unauthorized assumption ... of major policy decisions properly made by Congress.â â NLRB v. Fin. Inst. Emps. of Am., Local 1182, 475 U.S. 192, 202, 106 S.Ct. 1007, 89 L.Ed.2d 151 (1986) (alteration in original) (quoting Am. Ship Bldg. Co. v. NLRB, 380 U.S. 300, 318, 85 S.Ct. 955, 13 L.Ed.2d 855 (1965)). Particularly relevant to this dispute is that âthe Board has not been commissioned to effectuate the policies of the Labor Relations Act so single-mindedly that it may wholly ignore other and equally important Congressional objectives.â Southern S.S. Co. v. NLRB, 316 U.S. 81, 47, 62 S.Ct. 886, 86 L.Ed. 1246 (1942). âFrequently the entire scope of Congressional purpose calls for careful accommodation of one statutory scheme to another, and it is not too much to demand of an administrative body that it undertake this accommodation without excessive emphasis upon its immediate task.â Id. â[W]e have accordingly never deferred to the Boardâs remedial preferences where such preferences potentially trench upon federal statutes and policies unrelated to the NLRA.â Hoffman Plastic Compounds, Inc. v. NLRB, 535 U.S. 137, 144, 122 S.Ct. 1275, 152 L.Ed.2d 271 (2002).
Section 7 effectuated Congressâs intent to equalize bargaining power between employees and employers âby allowing employees to band together in confronting an employer regarding the terms and conditions of their employment,â and that â[t]here is no indication that Congress intended to limit this protection to situations in which an employeeâs activity and that of his fellow employees combine with one another in any particular way.â City Disposal, 465 U.S. at 835, 104 S.Ct. 1505. On the other hand, no court decision prior to the Boardâs ruling under review today had held that the Section 7 right to engage in âconcerted activities for the purpose of ... other mutual aid or protectionâ prohibited class action waivers in arbitration agreements.
Board precedent and some circuit courts have held that the provision protects collective-suit filings. âIt is well settled that the filing of a civil action by employees is protected activity . . . [and] by joining together to file the lawsuit [the employees] engaged in concerted activity.â 127 Rest. Corp., 331 NLRB 269, 275-76 (2000). â[A] lawsuit filed in good faith by a group of employees to achieve more favorable terms or conditions of employment is âconcerted activityâ under Section 7â of the NLRA. Brady v. Natâl Football League, 644 F.3d 661, 673 (8th Cir.2011). An employeeâs participation in a collective-bargaining agreementâs grievance procedure on behalf of himself and other employees is similarly
These cases under the NLRA give some support to the Boardâs analysis that collective and class claims, whether in lawsuits or in arbitration, are protected by Section 7. To stop here, though, is to make the NLRA the only relevant authority. The Federal Arbitration Act (âFAAâ) has equal importance in our review. Caselaw under the FAA points us. in a different direction than the course taken by the Board. As an initial matter, arbitration has been deemed not to deny a party any statutory right. See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 627, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985). Courts repeatedly have rejected litigantsâ attempts to assert a statutory right that cannot be effectively vindicated through arbitration.
The use of class action procedures, though, is not a substantive right. See Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 612-13, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997); Deposit Guar. Natâl Bank v. Roper, 445 U.S. 326, 332, 100 S.Ct. 1166, 63 L.Ed.2d 427 (1980) (â[T]he right of a litigant to employ Rule 23 is a procedural right only, ancillary to the litigation of substantive claims.â). This court similarly has âcharacterized a class action as âa procedural device.â â Reed v. Fla. Metro. Univ., Inc., 681 F.3d 630, 643 (5th Cir. 2012), abrogated on other grounds by Oxford Health Plans LLC v. Sutter,-U.S. .-, 133 S.Ct. 2064,- 186 L.Ed.2d 113 (2013) (quoting Blaz v. Belfer, 368 F.3d 501, 505 (5th Cir.2004)). âThus, while a class action may lead to certain types of remedies or relief, a class action is not itself a remedy.â Id. The Board distinguished such caselaw on the basis that the NLRA is essentially- suv- generis. That actâs fundamental precept is-the right for employees to act collectively. Thus, Rule 23 is not the source of the right to the relevant collective actions. The NLRA is.
Even so, there are numerous decisions holding that there is no right to use class procedures under various employment-related statutory frameworks. For example, the Supreme Court has determined that there is no substantive right to class procedures under the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq. (âADEAâ), despite the statute providing for class procedures. Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 32, Additional Information