Why it matters

Reiterating its stance against arbitration agreements that prohibit class or collective actions, a panel of the National Labor Relations Board (NLRB) ordered a California-based grocery chain to revise its employment agreement. A Bristol Farms worker filed a putative class action in state court asserting multiple wage violations. When the company sought to compel arbitration based on an employment agreement, the employee filed an unfair labor practices charge against the grocery store with the NLRB. An administrative law judge ordered the company to revise its employment agreement, and the employer responded by proposing a settlement agreement to modify the agreement to add the statement: "SIGNING THIS AGREEMENT IS OPTIONAL." Reaffirming its commitment to both D.R. Horton and Murphy Oil, the majority of the panel was not persuaded by Bristol Farms' argument that its agreement was "truly optional." "[A]n arbitration agreement that precludes collective action in all forums is unlawful even if entered into voluntarily, because it requires employees to prospectively waive their Section 7 right to engage in concerted activity," the majority wrote. A dissenting member of the panel voiced his position that both of the controversial precedents were wrongly decided and that employees have the right to waive their rights if they choose to.

Detailed discussion

A worker at California-based grocery chain Bristol Farms filed a putative collective action against the employer alleging multiple violations of state wage law. Based on an employment agreement signed by the employee that included a provision waiving his rights to class or collective action in any forum, the company moved to compel individual arbitration.

The employee filed a charge with the National Labor Relations Board (NLRB), and in October 2014 an administrative law judge (ALJ) found the agreement violated Section 8(a)(1) of the National Labor Relations Act (NLRA). The ALJ ordered Bristol Farms to rescind or revise the agreement to clarify to employees that it does not constitute a waiver in all forums of their right to maintain employment-related class or collective actions and provide notice to employees of the change.

Bristol Farms participated in the Board's dispute resolution program and proposed a settlement agreement. The employer suggested a modification to the agreement adding the statement: "SIGNING THIS AGREEMENT IS OPTIONAL," as well as an explicit class and collective action waiver and language clarifying that employees may access the Board and its processes.

The Board's Regional Director rejected the offer and the employer filed a motion seeking approval of the settlement agreement, arguing that the proposed changes rendered the agreement "truly optional."

But a majority of an NLRB panel disagreed, not just relying upon D.R. Horton and Murphy Oil but taking those holdings—that employment agreements waiving class arbitration violated the NLRA—one step further. "[A]n arbitration agreement that precludes collective action in all forums is unlawful even if entered into voluntarily, because it requires employees to prospectively waive their Section 7 rights to engage in concerted activity," the majority wrote.

The right to pursue joint, class, or collective claims arising in the workplace is a substantive right under Section 7 of the NLRA, the Board stressed.

"It is a bedrock principle of federal labor law and policy that agreements in which individual employees purport to give up the statutory right to act concertedly for their mutual aid or protection are void," the majority said. "[T]hat principle is reflected not simply in the Board's case law, but also in the decisions of the Supreme Court and in the Norris-LaGuardia Act, which broadly proscribes 'any undertaking or promise … in conflict with the public policy' of that statute and which anticipated the National Labor Relations Act in guaranteeing the right of employees to engage in 'concerted activities for the purpose of … mutual aid or protection,' including '[b]y all lawful means aiding any person participating or interested in any labor dispute who … is prosecuting any action or suit.' "

A dissenting member of the panel reached the opposite conclusion. Having previously dissented in the Murphy Oil case, he wrote that the NLRA does not vest authority in the Board to "dictate any particular procedures pertaining to the litigation of non-NLRA claims, nor does the Act entitle employees to class-type treatment of such claims."

Instead of creating a substantive right for employees to insist on class-type treatment of non-NLRA claims as the majority holds, the dissent said the NLRA in fact preserves every individual employee's right to adjust any employment-related dispute with his or her employer—including a waiver of class or collective rights.

The dissent also pointed out that the revised agreement merely permits employees to opt in to signing, making it "even more clearly lawful under the NLRA."

To read the order in Bristol Farms, click here.