Lawfulness of Employer Arbitration Policies Barring Class Actions Far From Settled

December 4, 2012

The NLRB continues to disapprove of employer policies limiting employees’ rights to pursue employment-related concerted action.  The question over the permissibility of arbitration class action waivers stems from recent U.S. Supreme Court decisions favoring deferral to arbitration.  In 2009, the U.S. Supreme Court handed down its seminal decision in 14 Penn Plaza LLC v. Pyett, where it enforced a collective bargaining agreement provision containing a clear and unmistakable waiver of employees’ right to pursue employment-related statutory claims in court in favor of arbitration.  Then, in 2011, in AT&T Mobility v. Concepcion, the U.S. Supreme Court held in the consumer context that a consumer arbitration agreement could bar class action lawsuits. However, the NLRB has pushed back, strongly disfavoring arbitration policies requiring deferral of all employment-related claims to individual arbitration.  In 2011, in the DR Horton case, the NLRB held than an arbitration agreement requiring employees to waive their right to bring a joint, class or collective action as a condition of employment violated the NLRA.  The employer appealed that determination to the Fifth Circuit Court of Appeals where the case is still pending. Then, just last month, an NLRB Administrative Law Judge struck down 24 Hour Fitness USA, Inc.’s policy requiring employees to waive their right to bring employment-related joint, class or collective actions in any arbitral or judicial forum.  The employer sought to distinguish its policy from the policy the NLRB deemed unlawful in DR Horton by pointing to the fact that employees could opt-out of the policy by taking a series of steps during the first 30 days of their employment.  However, the ALJ found that the opt-out provision was “an illusion” because the process was convoluted and employees were limited in their ability to identify coworkers who had also opted out.  The ALJ also rejected the argument that the U.S. Supreme Court’s pro-arbitration decisions like Concepcion meant 24 Hour Fitness’ policy should be upheld, holding that arbitration decisions in the consumer context are unrelated to arbitration decisions in the employment context. Clearly, the issue over the permissibility of class action waivers in employment agreements is far from settled.  Employers should be cautious in requiring employees to waive their right to bring employment-related joint, class or collective actions in any arbitral or judicial forum until federal courts—and perhaps the U.S. Supreme Court—weigh in.  Employers are well advised to confer with counsel over the risks and benefits of maintaining such policies in light of the unsettled state of the law.  If you have any questions or for more information about implementing lawful arbitration clauses in employee handbooks, please contact Douglas E. Solomon, Esq.,, or Douglas J. Klein, Esq.,, in the Labor Law Practice Group.

Tags: GeneralArbitrationNLRBCollective NegotiationsArbitration AgreementsEmployment Agreementswaiver of rights