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NLRB: Requiring individual arbitration, even in response to Section 7 activity, does not violate NLRA

By Ronald Miller, J.D.

The Board explained that the Supreme Court’s decision in Epic Systems establishes that requiring employees to resolve their employment related claims through individual arbitration rather than through collective action does not restrict the exercise of Section 7 rights.

On remand from the Ninth Circuit, the NLRB, in a three-member decision, reversed a prior Board ruling that an employer unlawfully promulgated a mutual arbitration policy (MAP) in response to employees filing a wage-and-hour-claim in state court. The Board determined that for the reasons stated in Cordua Restaurants, Inc., to find that the promulgation of the MAP violated the NLRA because it was in response to Section 7 activity would be inconsistent with the Supreme Court’s holding in Epic Systems Corp. v. Lewis that individual arbitration agreements do not violate the Act and must be enforced according to their terms. Accordingly, the Board ruled that the MAP was lawful and dismissed the complaint (Tarlton and Son, Inc., October 30, 2019).

Mutual arbitration policy. On April 29, 2016, the Board issued a decision in Tarlton and Son, Inc., concluding that the employer unlawfully maintained a mutual arbitration policy (MAP) requiring employees to waive their right to maintain class or collective actions. The Board also found that the employer violated Section 8(a)(1) by promulgating the MAP in response to the protected concerted activity of employees in jointly filing a state-court wage-and-hour claim.

The employer initially filed a petition for review in the D.C. Circuit on May 5, 2016. On May 27, it filed a motion for reconsideration with the Board. On June 8, 2016, the charging party filed a motion to dismiss the employer’s petition for review, arguing that the motion for reconsideration made the petition for review premature. The Board denied the employer’s motion for reconsideration on August 26. The D.C. Circuit subsequently granted the charging party’s motion to dismiss as premature.

After the Board denied the employer’s motion for reconsideration, it filed a second petition for review. However, the charging party had a petition for review pending in the Ninth Circuit. Thereafter, the employer’s petition was transferred to the Ninth Circuit. On March 28, 2017, the Ninth Circuit consolidated the petitions for review and the Board’s cross-application for enforcement.

Supreme Court resolution. On March 30, the Board filed a motion requesting the Ninth Circuit hold the case in abeyance pending the Supreme Court’s resolution of the issue presented in Lewis v. Epic Systems Corp.—namely, whether employer-employee agreements that contain class- and collective-action waivers and require individualized arbitration violate Section 8(a)(1). On May 21, 2018, the Supreme Court issued Epic Systems Corp. v. Lewis, holding that such agreements do not violated the NLRA and should be enforced as written pursuant to the Federal Arbitration Act.

On July 19, the Ninth Circuit denied the charging party’s petition for review, granted the employer’s petition for review, and denied the Board’s cross-application for enforcement, and remanded the case for further proceedings.

Promulgation of MAP lawful. Following remand, the sole remaining issue was whether the employer unlawfully promulgated the MAP in response to the employees’ joint filing of a wage-and-hour claim in California state court.

On November 7, 2013, three employees, including the charging party, filed a class-action in a California state court, alleging that the employer violated the California Labor Code related to the calculation and payment of their wages. After the employer received the complaint, it contacted attorneys, and provided them with a copy of the complaint. Thereafter, the attorneys drafted the MAP, and it was presented to the employees. Since that time, the employer has required employees, as a condition of their employment, to sign the MAP. The MAP requires employees to submit most legal claims arising out of their employment to binding arbitration. Additionally, employees forego any right to bring claims on a class or collective basis.

In its prior decision, the Board adopted the administrative law judge’s finding under Lutheran Heritage Village-Livonia that the MAP independently violated Section 8(a)(1) because it was promulgated in response to employees’ protected concerted activity. However, that decision pre-dated Epic Systems Corp. v. Lewis.

In its recent decision in Cordua Restaurants, Inc., the Board reaffirmed longstanding precedent establishing that Section 7 protects employees when they pursue legal claims concertedly. Therefore, the Board agreed with its prior finding that the charging party and the two other employees were engaged in protected concerted activity when they filed their lawsuit. Nevertheless, the Board also held in Cordua that the promulgation of an individual arbitration agreement in response to Section 7 activity does not violate the Act. The Board explained that the Supreme Court’s decision in Epic Systems establishes that requiring employees to resolve their employment related claims through individual arbitration rather than through collective action does not restrict the exercise of Section 7 rights.