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Voluntary Employment Arbitration Agreement with Class Action Waiver Unlawful: NLRB
Practical Law Legal Update w-001-0075 (Approx. 8 pages)
Voluntary Employment Arbitration Agreement with Class Action Waiver Unlawful: NLRB
by Practical Law Labor & Employment
| Published on 02 Dec 2015 • USA (National/Federal) |
In Bristol Farms, the National Labor Relations Board (NLRB) refused to approve a proposed settlement of an unfair labor practice (ULP) proceeding regarding an employer maintaining and enforcing a mandatory arbitration agreement to compel individual arbitration of a pending wage class action. Under the proposed settlement, the employer would rescind and replace that agreement with a voluntary arbitration agreement containing a class and collective action waiver.
On November 25, 2015, in Bristol Farms, a majority of the panel (Board) heading the NLRB's judicial functions refused to approve a proposed settlement of an unfair labor practice (ULP) proceeding involving an employer that maintained and enforced a mandatory arbitration agreement to compel individual arbitration of a pending wage class action. Under the proposed settlement, the employer would replace the original arbitration agreement with a new voluntary arbitration agreement containing a class and collective action waiver. Relying on On Assignment Staffing Services, where it found an opt-out provision did not save a mandatory arbitration clause with class action waivers, the Board majority held that an agreement that precludes employees from pursuing collective actions in all forums, even if agreed to voluntarily, violates the NLRA. (Bristol Farms, 363 NLRB No. 45, (Nov. 25, 2015).)
The employer and an NLRB regional office attempted to settle a ULP proceeding using the Board’s alternative dispute resolution program. An administrative law judge ordered, among other things, that the employer rescind or revise its mandatory Mutual Agreement to Arbitrate (MAA) to clarify that employees who enter it do not waive in all forums their rights to raise class or collective employment claims or to bring ULP charges.
As part of the proposed settlement, the employer offered to modify the MAA to make the arbitration agreement voluntary. The revised arbitration agreement (AA) stated that "SIGNING THIS AGREEMENT IS OPTIONAL."
The AA also included a class and collective action waiver making binding arbitration the "exclusive remedy" for employment-related claims except for certain specified claims including NLRA claims. The AA provided that an employee waive his right to:
"commence, be a party to, or act as a class member in any class or collective action against the other party relating to employment issues [and waive the] right to commence or be a party to any group, class, or collective action in arbitration or any other forum."
The regional office refused to enter into the settlement, citing the NLRB General Counsel's position that an employer cannot maintain an arbitration agreement in which employees waive the right to pursue class lawsuits, even if the agreement is voluntary. The employer moved to approve unilateral settlement seeking a Board order approving its proposed settlement agreement and the AA.
The Board majority (Chairman Pearce and Member McFerran) refused to approve the settlement, relying on its holdings in D.R. Horton and Murphy Oil, and more particularly in On Assignment Staffing Services, that class and collective action waivers in arbitration agreements are unlawful even if entered into voluntarily because:
- Those waivers require employees to prospectively waive their Section 7 right to engage in protected, concerted activity.
- Pursuing joint, class or collective actions on employment-related claims is a substantive right under the NLRA.
The Board majority found that when an employer enforces and maintains an arbitration agreement containing a class or collective action waiver, the following factors do not render the agreement lawful:
- The extent to which employees enter into the arbitration agreement voluntarily.
- Whether the agreement:
- explicitly states that employees may file Board charges or otherwise access the Board's processes; and
- excludes from mandatory arbitration any claims arising under the NLRA.
Member Miscimarra dissented, echoing Member Johnson's dissents in Murphy Oil and On Assignment Staffing by noting that:
- The NLRB lacks authority to dictate procedures for litigating non-NLRA claims.
- The NLRA does not entitle employees to pursue class actions.
- Courts, not the NLRB, should determine the enforceability of agreements containing class or collective action waivers.
- The majority has no basis to find the AA unlawful because the AA:
- states that employees have the right to file NLRB charges and access Board processes;
- excludes NLRA claims from mandatory arbitration;
- does not require employees to sign it; and
- has no effect unless employees decide to "opt-in" by signing it, in contrast with the "opt-out" provision that the majority found invalid in On Assignment Staffing.
- Section 9(a) of the NLRA gives employees the right to individually waive non-NLRA claims.
Bristol Farms extends D.R. Horton, Murphy Oil and On Assignment Staffing and suggests that there is no magical agreement language or contract formation formula that will convince the Board majority to hold an agreement requiring arbitration of employment-related disputes with a class or collective action waiver lawful. Those agreements are invalid when employees may voluntarily:
- Submit an opt-out form.
- Refuse to opt-in by refusing to sign the agreement.
UPDATE
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.)