NLRB Weighs In On Employment Arbitration Agreements Again

Topics: Arbitration Agreements

Following its “epic” loss last year on the issue of whether class action waiver provisions in employment arbitration agreements violate Section 7 of the NLRA, the NLRB has issued a new decision taking a much more employer-friendly view of mandatory arbitration agreements.  In Cordua Restaurants, Inc., the NLRB ruled today that an employer lawfully (without violating the NLRA) may roll out a mandatory arbitration agreement in response to the filing by an employee of a collective action alleging wage and hour violations under the Fair Labor Standards Act.  The NLRB held that the employer may require employees to sign the agreement as a condition of employment, thereby preventing them from opting in to the collective action, and that the employer may fire employees who refuse to sign the agreement.  However, if an employee already has a pending lawsuit against the employer, the employer may not lawfully discharge the employee because of the filing of the lawsuit (which is protected activity).  Stated differently, an employer does not violate the NLRA by rolling out a mandatory arbitration agreement with a class/collective action waiver, even if the agreement is rolled out in response to a lawsuit having been filed, and an employer does not violate the NLRA if it discharges employees for refusing to sign a lawful arbitration agreement.  An employer may not, however, terminate an employee for filing a legal claim or lawsuit against the employer regarding the terms and conditions of employment. 

This is a positive NLRB development for employers, but employers are cautioned that regardless of whether such a practice violates the NLRA, courts may look skeptically upon an employer’s rollout of a mandatory arbitration agreement in response to the filing of a class action lawsuit.  Once a putative (or certified) class action is pending, an employer’s ability to take actions that impact the rights of putative class members in the pending case is more limited.  Some courts will refuse to enforce arbitration agreements signed by employees only after a class action was filed, particularly where the agreement is a mandatory condition of employment, employees are not given an opportunity to opt out, and employees are not notified about the pending class action and the impact that signing the agreement has on their ability to participate in the case.  Employers in such circumstances are advised to consult counsel when considering rolling out new or revised arbitration agreements.