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The National Labor Relations Board Issues Employer-friendly Arbitration Ruling

In its groundbreaking decision in Epic Systems Corp. v. Lewis, 584 US ___, 138 S. Ct. 1612 (2018), the Supreme Court held that the National Labor Relations Act permits employer/employee agreements that contain class- and collective-action waivers and mandate arbitration for employment disputes. 

On August 14th, the National Labor Relations Board addressed two questions that Epic Systems left open:

  • Does the National Labor Relations Act prohibit employers from promulgating such an agreement in response to employees opting in to a collective action?
  • And, does the Act prohibit employers from threatening reprisal against employees who refuse to sign such an agreement?

The answer to both questions, said the Board, is no.

Cordua Restaurants, Inc.’s arbitration agreement required employees to waive their “right to file, participate or proceed in class or collective actions (including a Fair Labor Standards Act (FLSA) collective action) in any civil court or arbitration proceeding.”

After several employees opted in to a US District Court collective action against Cordua, it revised its arbitration agreement to also prohibit employees from opting in to collective actions. Plus, a Cordua manager threatened employees with reprisal if they failed to sign it.

Regarding the first question, the Board observed that Epic Systems establishes that an agreement requiring employment-related claims to be resolved through individual arbitration, rather than through class or collective litigation, does not offend the NLRA. Because opting in to a collective action “is merely a procedural step” for an employee to participate as a plaintiff, 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.”

Likewise, the Board concluded that Cordua didn’t violate the Act when it broadened its arbitration agreement.

To be sure, the revised agreement did require employees to agree not to opt in to a collective action. But the effect of that prohibition was simply to require employees to resolve their employment-related claims through individual arbitration, rather than through collective actions. As we have explained, this requirement does not restrict the exercise of Section 7 rights under Epic Systems.

Neither did Cordua violate the Act when its manager threatened employees with reprisal if they refused to sign the expanded agreement.

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 . . . that [Cordua’s supervisor] 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.

The case is Cordua Restaurants, Inc., 368 NLRB No. 43 (2019).

The Takeaway

Cordua Restaurants continues the trend in recent cases upholding an employer’s right to insist that employees arbitrate employment disputes. That’s a trend that most employers will celebrate, for good reason. Unlike civil litigation, arbitration is private and relatively inexpensive. Plus, in arbitration, unlike litigation, the parties may shape the applicable procedural rules and select the decision-maker.

Still, arbitration isn’t for every employer, again for good reason. An arbitrator’s rulings are virtually unassailable. Employers must pay the arbitrator’s fee. And, unlike civil court judges, arbitrators generally are loath to dispose of cases on dispositive motion.

So, celebrate the trend. But, before adopting an arbitration program, an employer should consult with employment counsel to make sure that the program advances the employer’s goals, consistent with applicable law.

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