Arbitration Pact Expressly Preserving Right to File NLRB Charges Interferes with That Right: NLRB | Practical Law

Arbitration Pact Expressly Preserving Right to File NLRB Charges Interferes with That Right: NLRB | Practical Law

In Securitas Security Services USA, Inc.the National Labor Relations Board (NLRB) held that an employer violated Section 8(a)(1) of the National Labor Relations Act (NLRA) by maintaining and enforcing two separate arbitration agreements with class action waivers, one of which contained an opt-out provision. Also, the NLRB held the employer violated Section 8(a)(1) because language in the arbitration agreements that attempted to preserve employees' rights to file unfair labor practice (ULP) charges would reasonably be understood by employees to restrict their right to file those charges with the NLRB.

Arbitration Pact Expressly Preserving Right to File NLRB Charges Interferes with That Right: NLRB

by Practical Law Labor & Employment
Published on 17 May 2016 • USA (National/Federal)
In Securitas Security Services USA, Inc. the National Labor Relations Board (NLRB) held that an employer violated Section 8(a)(1) of the National Labor Relations Act (NLRA) by maintaining and enforcing two separate arbitration agreements with class action waivers, one of which contained an opt-out provision. Also, the NLRB held the employer violated Section 8(a)(1) because language in the arbitration agreements that attempted to preserve employees' rights to file unfair labor practice (ULP) charges would reasonably be understood by employees to restrict their right to file those charges with the NLRB.
On May 11, 2016, in Securitas Security Services USA, Inc., the panel (Board) heading the NLRB's judicial functions affirmed the administrative law judge's (ALJ) holding that the employer violated Section 8(a)(1) of the NLRA by maintaining and enforcing two separate arbitration agreements that waived employees' rights to pursue class or collective actions in any forum, even though one of the arbitration agreements contained an opt-out provision. The Board also affirmed the ALJ's holding that the employer violated Section 8(a)(1) for the additional reason that employees would reasonably understand the language in the arbitration agreements that attempted to preserve employees' right to file NLRB charges to restrict their right to file unfair labor practice (ULP) charges. (363 N.L.R.B. No. 182 (May 11, 2016).)
Securitas Security Services is one of the latest D.R. Horton and Murphy Oil progeny to hold an employer unlawfully maintained or enforced an arbitration agreement to prevent employees from pursuing class or collective actions. (357 N.L.R.B. 2277 (2012); 361 N.L.R.B. No. 72 (Oct. 28, 2014); see Legal Updates, Mandatory Arbitration Agreement Prohibiting Class and Collective Actions Violates the NLRA: NLRB and NLRB Redoubles Stance that Mandatory Arbitration Clauses Waiving Employees' Rights to Pursue Class or Collective Actions Violate the NLRA). However, this decision also found ambiguity in agreement language preserving employees' rights to file ULP charges. The decision casts doubts that the current Board ever will hold a disclaimer or preservation of rights to file ULP charges provision attached to an arbitration agreement with a class or collective action waiver is effective and lawful.
The arbitration agreements stated that they applied to, "any dispute arising out of or related to Employee's employment with [Employer] or termination of employment." However, both contained the following language that attempted to preserve employees' right to file NLRB charges:
"Claims may be brought before an administrative agency but only to the extent applicable law permits access to such an agency notwithstanding the existence of an agreement to arbitrate. Such administrative claims include without limitation claims or charges brought before … the National Labor Relations Board."
Applying the first prong of the Lutheran Heritage Village-Livonia test, the Board majority (Chairman Pearce and Member Hirozawa) held that employees would reasonably understand this language to restrict their right to file NLRB charges because:
  • Employees were permitted to file claims before an administrative agency "only to the extent applicable law permits access to such an agency notwithstanding the existence of an agreement to arbitrate." The majority reasoned that this caveat would confuse employees about whether they retained the right to file ULP charges; and
  • Even if employees did understand that they retained the right to file ULP charges, they would likely not understand whether this right would modify the class action waiver contained in both arbitration agreements.
(See Lutheran Heritage Village-Livonia, 343 N.L.R.B. 646 (2004); see Article, Whether Unionized or Not, Employers Must Ensure Their Employment Policies Comply with the NLRA.)
In dissent, Member Miscimarra:
  • Characterized the majority's reading as implausible because the arbitration agreements expressly preserved the right to file NLRB charges. The majority strained to inject ambiguity into the agreement.
  • Speculated about whether any language could be drafted into arbitration agreements to adequately protect the right to file NLRB charges under the majority's reading.

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.)