Class Waivers for Unfair Labor Practice Claims? — Maybe

Contributed by Suzanne Newcomb

In August, we wrote about Court decisions expanding the reach of the Supreme Court’s American Express v. Italian Colors decision to allow employers to force employees to arbitrate FLSA claims individually rather than collectively.  Earlier this month, an Administrative Law Judge ruled that the AmEx decision also means that the National Labor Relations Board can no longer prohibit class waivers.

Spurred by a single employee’s unfair labor practice charge, the Board challenged Chesapeake Energy’s policy mandating that all employees agree to binding individual arbitration for all employment related disputes, including unfair labor practice allegations arising under the National Labor Relations Act.  Relying on the Board’s 2012 D.R. Horton decision, General Counsel for the National Labor Relations Board pressed the Administrative Law Judge to strike down the program claiming the right to engage in collective legal action was itself “protected concerted activity” and therefore, any agreement to waive collective action was invalid on its face.  The Judge disagreed, concluding that the Board’s prohibition of class waivers could not be sustained in light of the AmEx decision.

Still, we urge caution.  How the full Board will address this issue is yet to be seen.  At least one other of the Board’s Administrative Law Judges reached the opposite conclusion in August despite the employer’s counsel urging that AmEx controlled.  Moreover, despite his conclusion that the NLRB could no longer prohibit class action waivers, the Judge did find Chesapeake guilty of an unfair labor practice.  He ruled the arbitration policy at issue invalid as written and ordered Chesapeake to rescind the policy or revise it to exclude unfair labor practice allegations.  He also ordered Chesapeake to specifically notify its employees that they have the right to file charges at the NLRB.  The distinction here is subtle, but important.  An employer may legally compel arbitration through a properly drafted and implemented arbitration agreement; it may not prohibit its employees from filing a charge with the NLRB.  Moreover, if an arbitration agreement tends to cause employees to conclude that they cannot file NLRB charges as the Judge concluded the Chesapeake agreement did, there is a very real risk it will be struck down.

Incidentally, the same reasoning applies to EEOC charges.  An employer may not prohibit its employees from filing EEOC charges, nor can it prevent the EEOC from bringing an enforcement action in Court based a charge filed by an employee who has signed a binding arbitration agreement.  A binding arbitration agreement will operate to force the employee to adjudicate claims through an arbitration proceeding, rather than a court action.  However, should the EEOC decide to file its own enforcement action, all bets are off.  The EEOC can maintain a Court action and can even seek individual remedies on behalf of an employee even if that employee signed a binding arbitration agreement.