National Labor Relations Board Approves the Use of Mandatory Arbitration Agreements as Tool For Employers to Fight Collective Actions

A decision issued this week by the National Labor Relations Board gives employers greater clarity on the issue of mandatory arbitration agreements. (Cordua Restaurants, N.L.R.B., 16-CA-160901, August 14, 2019). This decision is an important follow up to the U.S. Supreme Court's landmark decision in Epic Systems Corp. v. Lewis, 584 U.S. __, 138 S.Ct. 1612 (2018). In Epic Systems, the Supreme Court held that agreements containing class-and collective-action waivers and stipulating that employment disputes are to be resolved by individualized arbitration do not violate the National Labor Relations Act and must be enforced as written pursuant to the Federal Arbitration Act.

Specifically, the Cordua Restaurants decision answered two questions left open in Epic Systems: (1) whether the National Labor Relations Act (NLRA) prohibits employers from promulgating mandatory arbitration agreements in response to employees opting in to a collective action; and (2) whether the NLRA prohibits employers from threatening to discharge an employee who refuses to sign a mandatory arbitration agreement. The Board's answer to both questions was NO. This is a victory for employers who desire to use mandatory arbitration agreements.

In a small victory for employees, however, the Board reaffirmed longstanding precedent establishing that Section 8(a)(1) of the NLRA prohibits employers from disciplining or discharging employees for engaging in concerted legal activity, which includes filing a class or collective action with fellow employees over wages, hours, or other terms and conditions of employment.

What this means for employers:

• Employers are allowed to condition employment on signing mandatory arbitration contracts.
• Employers can warn workers that they will be fired if they fail or refuse to sign mandatory arbitration agreements.
• Employers can require employees to sign mandatory arbitration pacts in response to workers opting into FLSA collective actions or class actions brought under state wage-and-hour laws. In those agreements, employees must agree that they will not opt into an existing collective action. This is a powerful weapon for an employer to wield in response to the filing of a collective action.
  

According to a 2018 study by the Economic Policy Institute, more than half of nonunion, private sector employers have mandatory arbitration procedures. However, these agreements are not "one size fits all." It is advisable to contact qualified counsel to craft an agreement that meets the needs of your particular business and workforce.