Judge Jennifer Walker Elrod of the U.S. Court of Appeals for the 5th Circuit. Courtesy photo

In a major win for employers, the U.S. Court of Appeals for the Fifth Circuit has shot down a National Labor Relations Board ruling forcing the Convergys Corp. to stop requiring its job applicants to sign class action waivers that prevent them from suing the company.

The recent 2-1 decision in Convergys v. NLRB rejects the board’s finding that the Ohio-based customer management company violated worker rights to self-organize under the National Labor Relations Act by requiring potential employees to sign class action waivers.

The background to the Aug. 7 decision is as follows. Convergys requires job applicants to sign an agreement that they will not “lead, join or serve as a member or group of persons” bringing a claim against the company.

A Convergys employee later complained to the NLRB about the class action waiver. While the board noted that the Fifth Circuit had allowed for class action waivers in arbitration agreements in its 2013 decision in D.R. Horton v. NRLB, it still rejected Convergys’ waiver requirement noting that it sought to distinguish its decision from Horton by recognizing a broad “right of employees to join together to improve their terms and conditions of employment through litigation.”

Convergys appealed the decision to the Fifth Circuit. And the threshold question for the appellate court was whether Section 7 of the NRLA, which guarantees the right to self-organize and collective bargain and “to engage in other concerted activities for the purpose of … other mutual aid or protection,” also contemplates an employees’ right to participate in class actions.

In her majority decision, Judge Jennifer Elrod wrote that class action waivers are allowed and that the court has previously ruled in Horton that an employee’s use of class actions or class action procedures is not a substantive right.

“After our decision in Horton, the idea that Section 7 protects a substantive right to participate in class and collective actions is still more firmly foreclosed,” Elrod wrote. “Simply put, the board’s position that Section 7 guarantees a substantive right of employees to participate in class and collective actions against their employers is contrary to our binding precedent.”

Elrod also noted that the U.S. Supreme Court is set to consider whether employer arbitration agreements that can ban them from pursuing class action claims violates federal labor laws this year in NRLB v. Murphy Oil. “In the meantime, however, we must apply our circuit’s binding precedent,” Elrod wrote.

Senior Judge Patrick Higginbotham dissented to decision, noting that Convergys’ case is different from previous Fifth Circuit decisions allowing class action waivers.

“Although this court has held time and again that such waivers are permissible, one important distinction makes the waiver in this case different: there is no arbitration agreement,” Higginbotham wrote.

Without being contained in an arbitration provision, which is shielded by the powerful Federal Arbitration Act that favors alternative dispute resolution over litigation, a bare class action waiver violates the NRLA, he wrote.

“The language of Section 7 cannot be plainer: class and collective actions are ‘other concerted activities for the purpose of … mutual aid or protection,” Higginbotham wrote. “Because such actions are rights protected by Section 7, employers cannot interfere with them by forcing employees to waive them. I would enforce the board’s orders, and so I dissent.”

Jennifer Rose Asbrock, a member Frost Brown Todd who represents Convergys, did not return a call for comment. Neither did Gregoire Sauter, a NLRB lawyer who represents the board on appeal.