On August 4, 2015, in Neiman Marcus Group, Inc., the panel (Board) heading the NLRB’s judicial functions found that the employer violated the NLRA by maintaining and enforcing a mandatory arbitration program (MAP) that employees would reasonably believe foreclosed their filing of unfair labor practice (ULP) charges with the NLRB. The Board majority also found the MAP unlawful under D.R. Horton and Murphy Oil because it required employees to waive class and collective actions in litigation and arbitration (see Legal Update, NLRB Redoubles Stance that Mandatory Arbitration Clauses Waiving Employees' Rights to Pursue Class or Collective Actions Violate the NLRA). Unlike in other D.R. Horton and Murphy Oil progeny, the Board ordered the employer not only to rescind the arbitration program but also to notify the court presiding over a former employee's pending collective wage and hour action that it was rescinding the binding arbitration agreement and would no longer rely on it to oppose the litigation and seek to compel arbitration on the employee's individual claims. The Board also found that although the employer had since revised the MAP as part of a ULP case settlement, the employer’s continued enforcement of the pre-settlement MAP in defending the former employee's lawsuit precluded it from asserting that the settlement barred this ULP proceeding. (362 N.L.R.B. slip op. 157 (Aug. 4, 2015).)

Neiman Marcus Group's MAP was comprised of a mandatory arbitration agreement, resolutions plan and employee handbook, each containing an acknowledgment that employees must sign as an employment condition. Collectively these documents required employees to individually submit all of their employment-related claims to binding arbitration.

In May 2010, Neiman Marcus rescinded and revised the MAP to settle a ULP proceeding challenging the MAP as unlawful because employees would reasonably perceive it as precluding them from filing ULP charges or otherwise making use of NLRB processes.

In August 2010, a former employee, Sheila Monjazeb, who was not employed at the time of the NLRB settlement and who had signed the prior version of the MAP acknowledgments brought a wage-and-hour class action in California state court. Neiman Marcus relied on the MAP to:

In 2012, Monjazeb filed a ULP charge with the NLRB, and the NLRB issued a complaint against Neiman Marcus. In February 2014, an NLRB Administrative Law Judge (ALJ) decided that Neiman Marcus violated Section 8(a)(1) of the NLRA by:

Neiman Marcus excepted to the ALJ’s decision.

The Board (Members Hirozawa, Johnson and McFerran) unanimously:

The Board majority (Members Hirozawa and McFerran) also:

Member Johnson noted that he did not join the majority's analysis of class or collective action waivers in arbitration agreements, citing his dissent in Murphy Oil. Finding that those portions of the (pre- or post-settlement) MAP were lawful, Member Johnson did not reach any of the other issues addressed in the decision, including whether:

The Board's decision in Neiman Marcus adds new wrinkles to the D.R. Horton and Murphy Oil progeny. This case involves the enforcement of a mandatory arbitration program that was previously found invalid by the NLRB because it appeared to foreclose employees seeking redress for employment-related claims at the NLRB. Under D.R. Horton, that program is now also invalid because of its a class action waiver provisions. The NLRB side-stepped prospective ULP and settlement compliance limitations periods and settlement bar issues by finding the recent attempt to enforce the pre-settlement arbitration program re-started the clock and was separate conduct from those that were part of allegations settled several years earlier.

This case illustrates that employers will have difficulty enforcing arbitration agreements to the NLRB's satisfaction against former employees who were not still employed when it rolled out newly revised, then NLRB-compliant agreements.

This case is also notable because the Board majority added a new remedy to its arsenal for ULP cases concerning employment litigations in which employers seek to enforce mandatory arbitration provisions with class or collective action waivers. The Board effectively ordered the employer to abandon an affirmative defense, motion to compel arbitration and general arguments that the plaintiff must pursue employment-related claims in individual arbitration that all relied on the arbitration agreement that NLRB condemned. This new directive is likely a response to the recent dismissal with prejudice of the litigation brought by the charging party in Murphy Oil and her colleagues. There, the plaintiffs sought to stay that litigation and the court's order compelling arbitration indefinitely while the NLRB sought to enforce the Board's decision. (Hobson v. Murphy Oil USA, Inc., No. CV-10-S-1486-S, (N.D. Ala. July 8, 2015).) The Board apparently hopes this new affirmative order might prevent similar results in the plaintiff's litigation.

Finally, this decision highlights that NLRB-endorsed revisions to employment policies or agreements are no sure defense against ULPs. The NLRB changed its view on class action waivers so dramatically between 2010 and 2012 that the current Board unsubtly implied it would find, whenever asked, that the revised MAP ratified by the NLRB in 2010 is unlawful under current Board law. The Board requires employers to adjust employment policies, agreements and practices as swiftly as it changes its precedent.

In Epic Systems Corp. v. Lewis, the US Supreme Court held that arbitration agreements with class and collective action waivers are not prohibited under Section 7 of the NLRA and must be enforced as written under the Federal Arbitration Act (FAA). The decision invalidates the NLRB's analysis in D.R. Horton and Murphy Oil on which this decision relies and therefore abrogates much of the analysis in this case (( (U.S. May 21, 2018); see Legal Update, SCOTUS: Arbitration Agreements with Class Action Waivers Must Be Enforced as Written, and NLRA Does Not Command Otherwise and Article, Expert Q&A on Class Action Waivers in the Employment Context.)