NLRB Continues Attack on Arbitration Agreements

In a recent decision, a NLRB administrative law judge held that a company's mandatory employment arbitration policy violated the NLRA, even though the policy permitted class claims by agreement of the parties and otherwise allowed class claims seeking to challenge the enforceability of the arbitration agreement itself.  The ALJ relied on D.R. Horton in reaching the conclusion that the arbitration agreement violated employees' Section 7 right to engage in concerted activity.  The employer argued that the agreement was valid and not barred by D.R. Horton because the agreement expressly permitted class claims in certain instances.  The ALJ disagreed, reasoning that the provision allowing the parties to "agree" to arbitrate claims on a class basis was hollow.  According to the ALJ, because the agreement did not specify the circumstances under which the employer would ever make such an agreement, employees would have no reasonable basis to believe that they would be able to proceed with claims collectively or as a class.  As such, the provision still "chilled" employees' Section 7 rights.

Notably, the ALJ also found problematic a confidentiality provision in the employer's arbitration agreement, requiring employees to maintain confidentiality of arbitration proceedings conducted pursuant to the agreement.  The ALJ found that this provision chilled employees' rights to discuss the terms and conditions of their employment, also violating the employees' rights under the NLRA.  The case is Advanced Services, Inc. and Tabita Sheppard Howard, issued on July 2, 2012, and is available on the NLRB website here. This case is another illustration of the NLRB's commitment to enforcing D.R. Horton and continuing to strike down class waiver provisions in employment arbitration agreements under its jurisdiction.  This will continue to be problematic for employers with such provisions, if D.R. Horton survives appeal.  California employers of course should be aware that at least one California state court (Iskanian v CLS) has rejected D.R. Horton and enforced an employment arbitration agreement containing a class waiver.  Interestingly, the California Legislature also just killed proposed legislation (SB 491) that would have barred contracts precluding claims on a class basis.  It is certain that the enforceability of class waivers and other aspects of arbitration agreements will continue to be the subject of litigation in California, so stay tuned for further developments in this area.