Even further expanding the NLRB’s shocking holdings in D.R. Horton and Murphy Oil on June 26, 2015, an NLRB administrative law judge (“ALJ”) ruled that even a non-mandatory arbitration agreement that is voluntarily entered into by employees is unlawful if it requires employees to waive joint, class or collective actions in all forums, judicial and arbitral.
In November 2011, AT&T Mobility Services (“AT&T”) sent via email a Management Arbitration Agreement (“Agreement”) to 24,000 of its non-union employees that included a class and collective action waiver. The email made clear employees could choose to opt-out of the Agreement and provided employees instructions on how to do so electronically.
The email’s subject line read: “Action Required: Notice Regarding Arbitration Agreement.” Once the Agreement was electronically opened, the page contained a button marked “Review Completed,” which when clicked, indicated that an employee had reviewed it. Employees who did not click on the button were sent additional emails until they had.
The emails provided each employee with a deadline of February 6, 2012 by which to opt-out of the Agreement and explained that opting out meant the employee was declining “to participate in the arbitration process.” It also provided assurances that no adverse action would be taken for opting out, provided employees with a hotline number to call should they have any questions and explicitly stated that employees could still bring claims before administrative agencies.
In June 2013, three employees filed a wage and hour class action in federal district court. AT&T successfully convinced the plaintiffs’ attorney that two of three employees had failed to opt-out of the Agreement and thus were bound to arbitrate their claims on an individual basis. The class action continued in federal court, and the federal district court judge found that only those 175 employees who had opted-out of the Agreement were eligible to participate in the class (and only 20 actually participated).
The other two employees proceeded to arbitration, and eventually sought new counsel. Their new attorney argued filed an unfair labor practice charge with the NLRB, arguing that the Agreement was unlawful under the NLRA, and the matter proceeded to a hearing.
While the ALJ conceded that the Agreement “initially was not mandatory” due to the opt-out option, she took issue with what she concluded was an absence of evidence that employees were actually appraised “in layman’s terms, of the ‘real-life’ consequences of the choice they were being asked to make.” On that basis, the ALJ reasoned that once an employee failed to opt-out, there was “no opportunity for an employee to reconsider his or her decision.”
Thus, the ALJ held that an employer and an individual employee may not enter into an arbitration agreement—even voluntarily—that irrevocably waives the employee’s future rights protected by the NLRA, such as participation in joint, class or collective actions.
The ALJ ordered AT&T to rescind the Agreement, or to revise it to make clear that employees are not required to waive their right to pursue joint, class or collective actions in all forums, arbitral or judicial.
While the ALJ had no problem stating that she was bound by NLRB precedent and the holdings of D.R. Horton and Murphy Oil, she failed to mention that Section 7 of the NLRA also affords employees the right to refrain from—and thus opt out of—collective action. Specifically, while the current Board, and the ALJ here, have conjured a prohibition on class action waivers out the clause of Section 7 which states that “Employees shall have the right to…engage in other concerted activities for the purpose of collective bargaining or other mutual air or protection…”, each has ignored Section 7’s equally important counterpart which provides that employees “shall also have the right to refrain from any or all such activities….”
Even though not one appellate court has sustained the NLRB’s extreme view, as more ALJ and Board decisions follow the anti-arbitration agreement views of D.R. Horton and Murphy Oil, the issue becomes increasingly difficult for employers to navigate. In fact, while the Board pushes forward undeterred, federal district courts and the U.S. Court of Appeals have outright rejected the Board’s rationale, making it evitable that the U.S. Supreme Court must eventually address the NLRB’s aggressive position on this issue. Considering that the NLRB’s view directly conflicts with the Supreme Court’s prior rulings regarding class action waivers in arbitration agreements, it will be interesting to see how the NLRB’s position will hold up under Supreme Court scrutiny.
In the meantime, any employer that wishes to adopt an arbitration agreement with its individual employees that provides for some kind of joint, collective, or class action waiver should contact experienced labor counsel to determine to the course of the particular employer.