Trial News

Two recent National Labor Relations Board (NLRB) rulings differentiate between what the National Labor Relations Act (NLRA) prohibits employers from including in forced arbitration agreements in employee contracts. In a unanimous ruling, the NLRB upheld an administrative law judge’s (ALJ) ruling that two call center employees were wrongfully terminated after refusing to sign a forced arbitration agreement as a condition of employment and that the defendant company had to alter its forced arbitration agreement because it violated the NLRA by making arbitration the exclusive remedy for workplace disputes. (Alorica, Inc., and its subsidiary/affiliate Expert Global Solutions, Inc., Nos. 18-CA-190846, 25-CA-185622, 25-CA-185626 (N.L.R.B. July 25, 2019).)

But in another ruling a few weeks later, the board took a different approach to allowing employers to add class or collective action waivers in forced arbitration agreements in response to employees filing such an action. The board examined two issues of first impression in light of the U.S. Supreme Court’s 2018 ruling in Epic Systems Corp. v. Lewis (138 S. Ct. 1612). (Cordúa Restaurants, Inc., Nos. 16-CA-160901, 16-CA-161830, 16-CA-170940, 16-CA-173451 (N.L.R.B. Aug. 14, 2019).)

In Alorica, the call center company Jennifer Fultz worked for changed ownership, and she refused to sign a forced arbitration agreement that the new owner required existing employees to sign as a condition of continued employment. She was terminated the same day. When Fultz informed HR that she was uncomfortable with the agreement, a supervisor told her she had 30 minutes to sign it or she would be considered to have “voluntarily resigned” her position. Fultz then signed the agreement under protest but immediately asked for it back, explaining that she would not sign it but also refused to quit her job. The HR employee called the company’s corporate headquarters and told them that Fultz refused to sign the agreement and refused to leave the premises. The corporate representative said to call the police to escort Fultz from the property because she was trespassing. The company also terminated another employee, Clarise Washington, on the same day for refusing to sign the agreement.

The Office and Professional Employees International Union, Local 153, filed a complaint with the NLRB on the two women’s behalf, alleging that Fultz and Washington had been wrongfully terminated and that the forced arbitration agreement violates §8(a)(1) of the NLRA because it precludes employees from filing a complaint with the board. The ALJ concluded that “any employer policy, including one contained in a mandatory arbitration agreement, which would reasonably be read to prohibit the filing of unfair labor practice charges with the Board violates the Act even if it does not explicitly restrict access to the Board.” The judge noted that the agreement does not contain any limiting language on arbitration being the sole forum for dispute resolution and that a layperson likely would read the agreement to exclude all other dispute forums, including the NLRB.

The ALJ further held that Fultz and Washington had been wrongfully terminated because their firings were in response to their refusal to comply with an unlawful requirement that violated the NLRA. The employer was ordered to make financial restitution to Fultz and Washington and offer to reinstate them. It also was ordered to stop using the unlawful forced arbitration agreement and to inform employees that the current agreement was no longer valid.

The employer appealed to the board—made up of three Trump administration appointees—which affirmed the ALJ’s ruling. However, instead of the reasonableness analysis that the ALJ had followed, it relied on a subsequent ruling that set forth a balancing test for the “invasion of employee rights” under the statute against the “business justifications for maintaining a challenged rule.” (The Boeing Co., 365 N.L.R.B. No. 154 (2017).) But this different test did not alter the outcome for Fultz and Washington. The board turned to a case that implemented the new test, which concluded that forced arbitration agreements violate the NLRA when “taken as a whole, [they] make arbitration the exclusive forum for the resolution of all claims, including federal statutory claims under the National Labor Relations Act.” Restricting employees’ access to the board and its complaint process—as the employer’s agreement did by stating that arbitration “resolved exclusively” all disputes—is unlawful.

New York City attorney Seth Goldstein, who represented the union, said, “I’m just happy that we were able to push back against forced arbitration and that the Trump board realized the negative implications of forcing employees to bring unfair labor practices to arbitration. All law has cycles, and this is the start of pushback against forced arbitration.”

But weeks later, the board overturned an ALJ ruling in a separate case involving employees who filed a collective action against their employer and challenged a forced arbitration agreement that waived their right to class or collective actions. Steven Ramirez filed a collective action against his employer, Cordúa Restaurants, with six other employees for violations of the Fair Labor Standards Act and the Texas Minimum Wage Act. Ramirez was subsequently fired, and Cordúa forced employees to sign a new arbitration agreement waiving their right to class or collective action. Employees were informed that failure to sign the agreement could lead to their hours being reduced and other disciplinary actions. An ALJ had ruled in favor of the employees before the Epic Systems ruling came down, and the board now reviewed the decision under the Epic Systems framework.

The board dealt with two issues of first impression following Epic Systems: whether the NLRA prohibits employers from creating forced arbitration agreements that waive class and collective actions in response to employees opting in to such an action and whether the statute prohibits employers from threatening to discipline or terminate an employee for filing a class or collective action with other employees. The board found that the NLRA does neither, meaning that employers can alter arbitration agreements after employees have filed class or collective actions and threaten their jobs if they refuse to sign those agreements. The board held that simply promulgating a forced arbitration agreement that requires employees to waive their class and collective action rights does not violate §7 of the NLRA because opting into a class or collective action is a procedural step and thus restricting employees from doing so does not affect a substantive §7 right.

But the board also reaffirmed that §8(a)(1) of the NLRA prohibits employers from taking an adverse action against an employee who chooses to engage “in concerted legal activity” under §7, which includes joining a class or collective action. When Ramirez filed the collective action, said the board, he was engaging in protected concerted activity under §7, and terminating him for that activity violated the NLRA. The board explained that Epic Systems did not address this particular issue, and although the ruling allows employers to create forced arbitration agreements that waive collective actions and seek to compel individual arbitration, “it did not similarly entitle [them] to discharge” employees for filing collective actions related to their wage-and-hour claims.

In a dissent, board member Lauren McFerran wrote that “if the respondent’s only aim were to compel arbitration, that would be lawful on its face under Epic Systems. . . . But here the respondent’s act of promulgating the new agreement was an attempt to discourage the employees from engaging in conduct protected by the Act—namely, opting into the lawsuit. This renders the otherwise lawful revised arbitration agreement unlawful.”