Board clarifies mandatory arbitration under NLRA

Building on last year's Supreme Court decision in Epic Systems.

On Wednesday, the National Labor Relations Board addressed several important questions involving employers’ arbitration agreements and the National Labor Relations Act. Specifically, the Board determined 3-1 that

  • The NLRA does not prohibit employers from telling employees that failing or refusing to sign an arbitration agreement will result in their discipline or discharge.
  • The NLRA does not prohibit employers from promulgating mandatory arbitration agreements after employees have opted in to a collective action under the Fair Labor Standards Act or state wage-and-hour laws.
  • However, the NLRA does prohibit employers from taking adverse action against employees for engaging in concerted activity by filing a class or collective action, consistent with the Board’s long-standing precedent.

This was the first Board decision to address the lawfulness of employer conduct surrounding mandatory arbitration agreements since the Supreme Court’s 2018 decision in Epic Systems v. Lewis. In Epic Systems, the Court held that arbitration agreements requiring employees to waive class or collective actions in court did not violate the NLRA.

Cordúa Restaurants 

In the NLRB case, Cordúa Restaurants, several employees filed a class and collective action, alleging violation of the FLSA and Texas wage and hour law. The employees had signed arbitration agreements, waiving their rights to "file, participate, or proceed" in such an action.

After suit was filed, other employees began opting in. As a result, the employer presented its employees with a revised arbitration agreement that also prohibited employees from "opting in" to collective actions. The employees were told that they would be taken off the work schedule if they did not agree to the revised arbitration agreement.

Some employees were discharged, and unfair labor practice charges were filed challenging the discharges, the promulgation of the revised arbitration agreement, and the warning to employees that they would be taken off the schedule if they did not sign the revised arbitration agreement.

After a hearing, an Administrative Law Judge found that two of the discharges violated the NLRA, as did the distribution of the revised arbitration agreement and warnings to remove employees from the work schedule if they didn't sign. In April 2018, the Board appeared to agree. But in August 2018, after Epic Systems, the Board vacated its decision.

This week's decision and the dissent

In this week's decision, the Board found that one employee, who had commenced the class and collective action, was unlawfully discharged for engaging in protected activity.

However, the Board's Republican majority (consisting of Chairman John Ring, and Members William Emanuel and Marvin Kaplan) found that “the promulgation of the revised agreement in response to that activity did not violate the Act." According to the Board majority,

Because opting in to a collective action is merely a procedural step required in order to participate as a plaintiff in a collective action, it follows that an arbitration agreement that prohibits employees from opting in to a collective action does not restrict the exercise of Section 7 rights and, accordingly, does not violate the Act. . . . [A]ny finding that the promulgation of the revised agreement violated the Act because it was in response to opt-in activity would be inconsistent with the Supreme Court’s holding in Epic Systems that individual arbitration agreements do not violate the Act and must be enforced according to their terms.

As to the warning given to employees if they did not sign the revised arbitration agreement, the Board majority found that a employee can be disciplined or discharged for refusing to sign an arbitration agreement but not for filing a class or collective action.

According to the majority,

Because Epic Systems permits an employer to condition employment on employees entering into an arbitration agreement that contains a class- or collective-action waiver, we find … [the employer’s manager] did not unlawfully threaten employees with reprisals. . . . Rather, his statements amounted to an explanation of the lawful consequences of failing to sign the agreement and an expression of the view that it would be preferable not to be removed from the schedule.

In dissent, Member Lauren McFerran (D) focused on the fact that the required arbitration agreement was promulgated in response to the employee class and collective lawsuit. She said,

If [the employer’s] only aim were to compel arbitration, that would be lawful on its face under Epic Systems. . . . But here the [employer's] act of promulgating the new agreement was an attempt to discourage the employees' [sic] from engaging in conduct protected by the Act — namely, opting into the lawsuit. This renders the otherwise lawful revised arbitration agreement unlawful.

Is the filing of class or collective litigation, or opting in, protected concerted activity at all?

The Board majority assumed without deciding that opting into class or collective litigation was concerted activity protected by the NLRA. According to the Board, which referenced cases dating back to 1942, the protections for concerted activity have long been deemed to include collective litigation. But the Board’s assumption finds no support from the current NLRB General Counsel, Peter Robb. His view is that class or collective litigation of non-NLRA claims is not protected concerted activity, and his view appears to be supported by Epic Systems

Robin Shea has 30 years' experience in employment litigation, including Title VII and the Age Discrimination in Employment Act, the Americans with Disabilities Act (including the Amendments Act). 
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