October 17, 2019

NLRB Offers Employers Guidance on Imposing Class Action Waivers After Being Sued

On August 14, 2019, the National Labor Relations Board (NLRB) issued a decision in Cordua Restaurants, Inc., 368 NLRB No. 43, expanding upon the U.S. Supreme Court’s Epic Systems v. Lewis ruling last year regarding collective actions and mandatory arbitration agreements.

Last year, the U.S. Supreme Court decision in Epic Systems held that agreements with class action and collective action waivers do not violate the National Labor Relations Act (NLRA), and any disputes arising out of the employment relationship must be resolved through individual arbitration. Thus, the Court stated that arbitration agreements are to be enforced as written under the Federal Arbitration Act.

Since the Epic Systems decision, the NLRB has dismissed complaints alleging that employers unlawfully maintained or enforced arbitration agreements requiring employees to waive their rights to pursue employment disputes through a class or collective action as a condition of employment.

The NLRB made two additional interpretations to the Supreme Court decision in Cordua Restaurants. First, the NLRB determined that the NLRA does not prohibit employers from promulgating class action waivers in response to Section 7 activity. This is because the Court stated in Epic Systems that Section 7 did nothing to address the question of class and collective actions. In addition, the NLRB reasoned that when an employee chooses to opt into a collective action, that employee is merely taking a procedural step to participate in a collective action. Thus, an arbitration agreement prohibiting employees from opting into a collective action does nothing to restrict their exercise of Section 7 rights. The NLRB differentiated this from circumstances when an employer promulgates an unlawful rule that does restrict its employees’ protected activities, such as implementing a rule prohibiting all solicitation on nonworking time.

The promulgation of the revised arbitration agreement in Cordua Restaurants required employees to agree not to opt into a collective action and, instead, resolve their employment-related claims through individual arbitration. Thus, the NLRB found that the revised arbitration agreement was lawful.

Additionally, the NLRB found that the NLRA allows employers to discipline employees who refuse to sign a mandatory arbitration agreement. Epic Systems allows an employer to condition employment on signing an arbitration agreement containing class or collective-action waivers. In Cordua Restaurants, the assistant manager distributed a revised arbitration agreement and told employees they would be removed from the schedule if they refused to sign it. Thus, the NLRB found that no unlawful threats were made to the employees. Rather, the statements were lawful expressions of the consequences imposed on employees for failing to sign the agreement.

In the wake of the recent Supreme Court case, only time will tell how the NLRB continues to apply this interpretation.

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