Following a recent trend that has not been received well by the courts, a divided panel of the National Labor Relations Board (NLRB or Board) invalidated an arbitration policy that required employees to waive their rights to pursue class or collective actions in employment-related claims in all forums, whether arbitral or judicial. Ralph’s Grocery Company, 363 NLRB No. 128 (Feb. 23, 2016).
The Mediation and Binding Arbitration Policy
Ralph’s Grocery maintained a Mediation and Binding Arbitration Policy (MBAP). The MBAP, which is four pages long and contains an introduction and 14 separate untitled paragraphs, is deemed accepted by an applicant upon submitting an application and by an employee upon acceptance or continuation of employment. The MBAP is binding on the employee and the Company. The introductory paragraph states, in relevant part:
This Arbitration Policy applies to all Employees' employment (or application for employment) and is aimed at resolving employment-related disputes quickly and fairly, to the benefit of everyone involved. This Arbitration Policy is not meant to supplant the purpose, role and effect of managers, supervisors, administrators, any applicable grievance and arbitration procedure contained in a collective bargaining agreement (CBA) and applicable internal grievance and complaint/dispute resolution procedures available to Employees for resolving workplace issues, including, for example, complaints of unlawful harassment, discrimination or retaliation. Employees should continue to seek resolution of employment-related disputes through such channels to the extent they are applicable to their disputes. However, this Arbitration Policy is the exclusive mechanism for formal resolution of disputes and awards of relief that otherwise would be available to Employees or the Company in a court of law or equity or in an administrative agency.
Paragraph 2 partially defines the term “Covered Disputes” and states in part:
Except for Excluded Disputes, this Arbitration Policy applies to any and all other employment-related disputes that exist or arise between Employees and Ralphs (or any of them) that would constitute cognizable claims or causes of action in a federal, state or local court or agency under applicable federal, state or local laws (referred to in this Arbitration Policy as “Covered Disputes”).
Paragraph 4 begins by stating that arbitration is the sole and exclusive remedy for present and future “Covered Disputes” and instructing that the MBAP requires “to the fullest extent permitted by law” resolution of all “Covered Disputes” by final and binding arbitration.
Paragraph 6 discusses the MBAP's effect on employees' access to administrative processes, and states in part:
Notwithstanding any other provision of this Arbitration Policy all Employees retain the right under the National Labor Relations Act (NLRA) to file charges with the National Labor Relations Board (NLRB), and to file charges with the United States Equal Employment Opportunity Commission (EEOC) under federal equal employment opportunity laws within the EEOC's administrative jurisdiction.
Paragraph 8 states:
[T]here is no right or authority for Covered Disputes to be heard or arbitrated on a class action basis, as a private attorney general, or on bases involving claims or disputes brought in a representative capacity on behalf of the general public, of other Ralph's employees (or any of them), or of other persons alleged to be similarly situated.
The paragraph then defines “Representative Action” as:
Any action or proceeding brought against Ralphs (or any of them) by any person (whether an Employee bound by this Arbitration Policy or not) or entity in a representative capacity on behalf of or for the benefit of (in whole or in part) any Employee bound by this Arbitration Policy.” Paragraph 8 concludes by stating that, while the Federal Rules of Civil Procedure apply, “ “there are no Judge or Jury trials and there are no class actions or Representative Actions permitted under this Arbitration Policy. [Emphasis in original.]
On July 31, 2013, an Administrative Law Judge (ALJ) invalidated the policy. The case was then appealed to the NLRB.
The Board’s Decision
Writing for the majority, Chairman Pearce and Member McFerran ruled that the ALJ properly applied the Board's decision in D. R. Horton, 357 NLRB No. 184 (2012), enf. denied in part, 737 F.3d 344 (5th Cir. 2013), and found that Ralph’s violated Section 8(a)(1) of the National Labor Relations Act (the Act) by maintaining and enforcing a policy that required employees, as a condition of employment, to waive their rights to pursue class or collective actions in employment-related claims in all forums, whether arbitral or judicial. The majority observed that in Murphy Oil USA, Inc., 361 NLRB No. 72 (2014), enf. denied in relevant part 808 F.3d 1013 (5th Cir. 2015), the Board reaffirmed the relevant holdings of D. R. Horton.
The majority also agreed with the ALJ that the MBAP violated Section 8(a)(1) by interfering with employees' right to file charges with the Board. The Board will find that a policy upon which employment is conditioned violates Section 8(a)(1) if employees “would reasonably believe the policy interferes with their ability to file a Board charge or otherwise access the Board's processes.”
Ralph’s argued that employees would not reasonably conclude that the MBAP prevents them from filing unfair labor charges with the Board because paragraph 6 on page 3 of the policy informs employees that they retain the right to file charges with the Board. However, the Board disagreed that this sentence saved the policy.
According to the majority, “[p]aragraphs 2 and 4 of the policy emphasize that all employment-related disputes must be resolved through final and binding arbitration. Paragraph 6 reiterates this requirement, declaring in the second sentence that final and binding arbitration is the sole and exclusive remedy for Covered Disputes (which, as defined elsewhere in the document, would include disputes involving unfair labor practices under the Act).” They reasoned that “while the last sentence of paragraph 6 allows for charges to be filed with the Board, employees would reasonably be confused as to their possession of this statutory right when the sentence is read together with the previous two sentences that state explicitly that arbitration is the sole forum for the resolution of employment disputes.”
The majority went on to observe that the ambiguity surrounding the right to file Board charges is further demonstrated by an employment application that all employees were required to sign acknowledging that they read, understood, and agreed to follow the MBAP. The application contains a one-paragraph summary of the MBAP, but any reference to employees' right to file Board charges is conspicuously absent from that summary. Instead, the summary focuses exclusively on the requirement that employees waive the right to resolve employment-related disputes before any Federal court or agency. “In these circumstances, we find that employees would reasonably believe that the MBAP interfered with their statutory right to have the Boarddetermine whether their Section 7 rights have been violated.”
Member Miscimarra dissented from the majority for the same reasons explained in his partial dissenting opinion in Murphy Oil USA, Inc. He reasoned that Ralph’s did not violate the Act by attempting to enforce the arbitration agreement. He also disagreed with the majority’s finding that the policy unlawfully prohibited employees from filing charges with the Board: “In the instant case, it is clear that the Arbitration Policy does not prohibit NLRB charge-filing. To the contrary, the Policy makes crystal clear that employees retain the right to file charges with the Board.” He observed that the policy states: “Notwithstanding any other provision of this Arbitration Policy, all Employees retain the right under the National Labor Relations Act (‘NLRA’) to file charges with the National Labor Relations Board (‘NLRB’) . . . .”
The Board continues to invalidate mandatory arbitration agreements with class action waivers, even though the Fifth, Second, Eighth, Ninth, and Eleventh Circuits have reversed that position. The issue may very well be headed for resolution by the Supreme Court, making the recent Scalia vacancy even more significant.
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