Labor & Employment Law Blog

Many employers have attempted to require current and former employees to pursue claims individually and not by way of class action lawsuits by requiring employees to agree to arbitrate individually whatever claims they might have.

The National Labor Relations Board contends employer-employee arbitration agreement requiring employees to arbitrate whatever claims they have individually violates the National Labor Relations Act ("NLRA"):

• On January 3, 2012, in D.R. Horton, Inc., 357 N.L.R.B. No. 184, the NLRB issued a decision and order against D.R. Horton, Inc., stating an employer violates Section 8(a)(1) of the NLRA when the employer "requires employees . . . , as a condition of their employment, to sign an agreement that precludes them from filing joint, class, or collective claims addressing their wages, hours or other working conditions against the employer in any forum, arbitral or judicial." The NLRB found "such an agreement unlawfully restricts employees' Section 7 right to engage in concerted action for mutual aid or protection notwithstanding the Federal Arbitration Act (FAA), which generally makes employment-related arbitration agreements judicially enforceable.

• On April 30, 2012, the NLRB issued a press release touting the NLRB's filing of a complaint against 24 Hour Fitness USA, Inc., alleging 24 Hour Fitness violated the NLRA "by insisting that all employment-related disputes be resolved by individual arbitration." The NLRB press release states its investigation "was prompted by a charge filed by an employee at the 24 Hour Fitness center in San Ramon, California. Since at least the summer of 2010, the company has enforced its no-class-action policy by asserting it in litigation brought by employees in numerous cases, seven of which are cited in the complaint. In each case, employees, who are not represented by a union, sought to bring workplace-related claims, such as wage and hour violations, on a class-wide basis. In response, 24 Hour Fitness sought to compel the employees to submit their common claims to individual arbitrations, citing the policy in its handbook." In other words, the NLRB contends 24 Hour Fitness violated the NLRA by responding to lawsuits by filing in the courts where those lawsuits were brought petitions to compel arbitration (i.e., to enforce in court the arbitration agreements the plaintiff employees signed).

It remains to be seen whether the courts and, particularly, the Supreme Court of the United States, will uphold the NLRB's position that employer-employee arbitration agreements requiring employees to pursue claims against their employer by arbitration individually and not on a class basis or in a representative capacity violate employee's rights to collective action under the NLRA. The issue is not presently before the Supreme Court, but we think it is a virtual certainty that the issue will eventually be addressed by the Supreme Court.

In the meantime, based on the position the NLRB is taking and based on the NLRB's enforcement actions against employers using arbitration agreements requiring employees to arbitrate claims on an individual basis, we think employers that have in place or are considering implementing arbitration agreements requiring employees to arbitrate claims on an individual basis should consult competent employment law counsel.