NEW ORLEANS (Legal Newsline) - Federal appellate courts are at odds with each other over individual arbitration agreements, with the U.S. Court of Appeals for the Fifth Circuit recently refusing to enforce an order of the National Labor Relations Board that found such an agreement invalid.

Last month, the Fifth Circuit granted Citi Trends Inc.’s petition for review of the NLRB’s order and denied the board’s cross-application for enforcement of its order.

The appeals court refused to abandon precedent and side with the NLRB.

“The Board concedes, as it must, that its order contravenes our published decisions in D.R. Horton, Inc. v. NLRB and Murphy Oil USA, Inc. v. NLRB, which hold that ‘an employer does not engage in unfair labor practices by maintaining and enforcing an arbitration agreement prohibiting employee class or collective actions and requiring employment-related claims to be resolved through individual arbitration,’” a three-judge panel wrote in its two-page, per curiam opinion.

“Although the Board asks us to reconsider our holdings in D.R. Horton and Murphy Oil, this Court is bound by its prior published decisions.”

In D.R. Horton, the NLRB had ruled that an arbitration agreement under which employees were required to waive the right to bring class or collective actions violated the National Labor Relations Act, or NLRA.

In Murphy Oil, the board had ruled that similar arbitration agreements barring the gas station chain’s workers from pursuing class or collective actions were unlawful.

The Fifth Circuit reversed both of the board’s rulings.

The NLRB, an independent agency of the U.S. government, is charged with investigating and remedying unfair labor practices.

In Citi Trends, former employee Dedrick Peterkin filed a charge in 2012, taking issue with the company’s arbitration agreement. He has not pursued an action against the company.

The board had declared Citi Trends’ mandatory agreement unlawful because it “requires employees to waive their right to maintain class or collective actions in all forums, whether arbitral or judicial.”

Judges William Eugene Davis, Leslie H. Southwick and Stephen A. Higginson made up the Fifth Circuit panel.

Soon after the Fifth Circuit’s ruling, the U.S. Court of Appeals for the Ninth Circuit went the other way, instead siding with the NLRB’s approach and ruling that individual arbitration waiver agreements are unenforceable under federal law.

In its ruling last month, the majority of the Ninth Circuit’s three-judge panel vacated an order compelling individual arbitration in a class action filed against Ernst & Young by its employees.

The employees, Stephen Morris and Kelly McDaniel, alleged Ernst & Young, one of the “Big Four” audit firms, misclassified employees to deny overtime wages in violation of the Fair Labor Standards Act and California labor laws.

Chief Judge Sidney R. Thomas and Judge Andrew D. Hurwitz agreed the waiver agreements are unenforceable under both the NLRA and the Federal Arbitration Act, or FAA.

Thomas, who wrote the Ninth Circuit’s majority opinion, said an employer violates Section 7 and Section 8 of the NLRA by requiring employees to sign an agreement precluding them from bringing, in any forum, a concerted legal claim regarding wages, hours and terms of conditions of employment.

The Ninth Circuit is the second court to have found in favor of the NLRB’s approach; the first being the Seventh Circuit in May.

The Second and Eighth circuits, like the Fifth Circuit, have ruled against the board.

Other cases raising the same issue currently are pending before the Second, Third, Fourth, Sixth, Eleventh and D.C. circuits.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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