California Labor &
Employment Law Blog
Nov 8, 2012

NLRB Rules That Opt Out Right Does Not Save Arbitration Agreement with Class Waiver

Topics: Arbitration Agreements

Ealier this year, we posted about a complaint filed by the NLRB against 24 Hour Fitness, alleging that the company's arbitration policy (including a class waiver) violated the NLRA.  This week, an NLRB administrative law judge ruled that the 24 Hour Fitness policy indeed violates the NLRA, following the NLRB's earlier (and oft-criticized) decision in D.R. Horton.  In the case of 24 Hour Fitness, the factual twist is that the arbitration policy and agreement expressly allows employees to opt out of the agreement to arbitrate.  24 Hour Fitness argued that this opt out right distinguished the case from D.R. Horton because arbitration was not a condition of employment (since employees could opt out if they wanted to preserve their right to engage in concerted, collective action).  The ALJ disagreed and found that the policy, even with the opt-out right, violated the NLRA.  The ALJ found the opt out right to be an "illusion" and a right easily overlooked or unconsciously forfeited by employees, thus still abridging the right to engage in collective action. 

While it seems clear that the NLRB's focus and attack on employer arbitration agreements will continue unless and until overruled, employers are reminded that the NLRB's initial decision in this area, D.R. Horton, is still on appeal and pending decision by the Fifth Circuit Court of Appeal.  Stay tuned. 

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