As previously discussed on Spencer Fane Human Resource Solutions, an employer can lawfully require its employees to sign individual arbitration agreements with class action waivers as a term and condition of their employment. See Employee Class Action Waivers Held Enforceable (May 22, 2018). However, even if individual arbitration agreements with class action waivers are not, as a general rule, unlawful under the National Labor Relations Act (“NLRA”), can an employer require its employees to sign such an agreement after a collective or class action lawsuit has already been filed against it? The National Labor Relations Board (the “Board”) recently said yes in Cordúa Restaurants, Inc., Case 16-CA-160901 (August 14, 2019).

Facts

The restaurant-group employer in Cordua required its employees to waive their right “to file, participate or proceed in” certain proceedings, including opt-in actions under the Fair Labor Standards Act (the “FLSA”) known as “collective actions.” In January of 2015, a group of seven employees filed a collective action lawsuit on behalf of themselves and other similarly situated employees under the FLSA. On September 29, 2015, after a number of employees had opted into the collective action, Cordúa began distributing a revised arbitration agreement (the “Revised Agreement”). In addition to the original prohibitions against filing, participating or proceeding in collective actions, the Revised Agreement further prohibited “opting into” collective actions.

The employees responded by filing an unfair labor practice charge against Cordúa alleging that it violated section 8(a)(1) of the NLRA by attempting to implement the Revised Agreement. An administrative law judge agreed, but after extended administrative litigation and the Supreme Court’s decision in Epic Systems v. Lewis, the Board reversed the ruling.

Legal Analysis

In deciding in favor of the employer in Cordua, the Board made a number of important pronouncements regarding the legality of implementing individual arbitration agreements while class or collective actions are pending. The key holdings are summarized below:

    • Even if opting into a collective action constitutes a protected activity, an employer does not violate the NLRA by asking employees to enter into an individual arbitration agreement while a collective action is pending. In reaching this conclusion, the Board clarified that “opting into a collective action is merely a procedural step required in order to participate as a plaintiff in a collective action.”
    • Asking employees to enter into an individual arbitration agreement while a collective action is pending does not unlawfully “chill” protected activity under section 7 of the NLRA.
    • Advising employees that a refusal to sign a revised arbitration agreement may result in negative consequences (such as not being scheduled to work) does not necessarily violate the NLRA. Rather, the Board found that statements about such negative consequences in Cordua “amounted to an explanation of the lawful consequences of failing to sign the agreement and an expression of the view that it would be preferable not to be removed from the schedule.” Cordua, at pg. 4.
    • It is still unlawful under the NLRA to discipline or discharge employees because they filed a class or collective action.

It is also important to note that the Board’s discussion in Cordúa only involved issues relating to the reach of the NLRA. The Board does not and cannot opine on whether any of the described conduct runs afoul of the FLSA’s anti-retaliation provisions.

Key Takeaways

    1. An employer does not violate the NLRA by requiring its employees to enter into individual arbitration agreements with class action waivers, even it does so after a class or collective action lawsuit has already been filed.
    2. Informing employees of the “lawful consequences” that will result from failing to sign an individual arbitration agreement with a class action waiver does not necessarily constitute an unlawful threat.
    3. However, it is unlawful to discipline or discharge an employee because they file or opt into a collective or class action lawsuit.