Following in the wake of an earlier opinion, the Eighth Circuit rebutted the National Labor Relations Board’s (“Board”) arguments that by requiring employees to enter into arbitration agreements with a class and collective action waiver, it violated the National Labor Relations Act (“NLRA”). This comes only a week after the Seventh Circuit ruled in favor of the Board’s position on essentially the same issue. See Lewis v. Epic Systems Corp., which we recently discussed here.
In Cellular Sales of Missouri, LLC v. National Labor Relations Board, No. 15-1620 (June 2, 2016), the Eighth Circuit drew upon Owen v. Bristol Care, Inc., 702 F.3d 1050 (8th Cir. 2013), to reject a Board decision premised on the conclusion that the company violated Section 8(a)(1) of the NLRA by requiring its employees to enter into an arbitration agreement that waived class or collective actions arising from employment disputes.
The Long Path to the Eighth Circuit
Procedurally, Cellular Sales of Missouri is unique for its multipronged route to the Eighth Circuit. John Bauer entered into an employment agreement with Cellular Sales that provided he would individually arbitrate all disputes with the company and waived the right to bring class or collective actions. When Bauer’s employment ended, he filed a putative collective action in federal court claiming violations of the Fair Labor Standards Act (“FLSA”). The company moved to dismiss the action and compel arbitration. The district court granted the motion, finding the agreement was enforceable. Bauer began arbitration with the company, but the parties ultimately settled the dispute. Upon a joint motion, the district approved the settlement and dismissed the suit with prejudice.
Bauer also filed an unfair labor practice charge with the Board while his legal action was pending, claiming that the agreement’s class action waiver violated his right to engage in concerted activity in violation of Sections 7 and 8(a)(1) of the NLRA.
Ultimately, the Board ordered the company to take several “remedial” steps, including: (1) to either rescind the agreement or revise it to state that employees do not waive their rights to file class or collective actions in all forums and are not prevented from filing charges with the Board; (2) notifying current and former employees of the revisions; (3) notifying the district court of the changes and that the company no longer opposed Bauer’s lawsuit (which was dismissed a year before); and (4) to compensate Bauer for his legal fees and defense costs in opposing the company’s long-resolved motion to dismiss and to compel arbitration (no matter that the company won the motion, Bauer did not appeal and the parties had settled).
At the Eighth Circuit
The petition for review and cross-application for enforcement before the Eighth Circuit were the next steps. Because the Circuit’s Owen holding was “fatal” to its argument “that a mandatory agreement requiring individual arbitration of work-related claims” violates the NLRA, the Board sought an initial en banc hearing and reconsideration of the Owen opinion. The Eighth Circuit denied the motion, and relying on Owen, concluded that the company did not run afoul of Section 8(a)(1) “by requiring its employees to enter into an arbitration agreement that included a waiver of class or collective actions in all forums” to decide work-related disputes.
The company also maintained that it did not violate Section 8(a)(1) by seeking to enforce its arbitration agreement when Bauer filed a legal action. The Board had maintained that enforcing an unlawful contract was a separate violation of the NLRA, requiring the extensive curative actions described above. The Eighth Circuit disagreed.
If a class action waiver did not violate Section 8(a)(1), then the company’s attempt to enforce that waiver did not violate Section 8(a)(1) either. Thus, the appellate court granted the petition for review and declined to enforce the Board’s order on the issue and also declined to enforce the Board’s extensive remedies relating to the enforcement issue.
Some Deference to the Board on Waiver of NLRA Rights
The Eighth Circuit also considered the Board’s finding that the employees would construe the arbitration agreement to foreclose their right to file charges with the Board or use its procedures. On this issue, which is separate from a class waiver analysis, the Eighth Circuit gave “considerable deference” to the Board. Accordingly, it was “reasonable and consistent with the NLRA” for the Board to find that company employees could reasonably interpret the mandatory arbitration agreement to foreclose their right to file charges with the Board. Indeed, the agreement broadly stated that all claims “shall be decided by arbitration.” It did not contain saving language that preserved an employee’s right to file a Board charge. And, the fact that Bauer actually filed with the Board was not dispositive, because “the question is whether the employer’s action is ‘likely to have a chilling effect’ on its employees’ exercise of their rights under the NLRA,” citing D.R. Horton v. NLRB, 737 F.3d 344, 357 (5th Cir. 2013).
So, the court denied the petition for review and enforced the Board’s order as to this issue and the corrective measures for those still subject to the arbitration agreement.
The court also rejected the company’s secondary arguments on enforceability, that the Board charge was not timely filed, and that Bauer was no longer an “employee” when the charge was filed. That said, the decision is still a victory for proponents of binding individual arbitration.
The Bottom Line
The Cellular Sales of Missouri opinion reaffirms the Eighth Circuit’s support for arbitration agreements with class and collective action waivers in the employment arena. And it reaffirms the circuit split that makes the issue ripe for U.S. Supreme Court review.