Since arbitration helps companies avoid the high costs associated with litigation, companies often have employees enter into agreements to arbitrate disputes rather than take them to court.
Workers at Applebee’s restaurants in Pennsylvania, New Jersey, Maryland, and Delaware typically sign an arbitration agreement that includes a term prohibiting employees from becoming members of a class action. The National Labor Relations Board recently ruled that this arbitration agreement violates federal labor law.
The Board recently reversed its position on class action waivers in arbitration agreements. Such waivers used to be permissible. Now, though, arbitration agreements that preclude workers from joining a class action are unlawful. Unsurprisingly, Applebee’s counsel argued that the NLRB should follow federal court cases that permit these waivers. However, the Administrative Law Judge who heard the case disagreed stating that NLRB judges must follow NLRB law unless it has been reversed by the United States Supreme Court.
The state of law related to arbitration agreements is evolving, and it is possible that the Supreme Court will make a final determination of the legality of arbitration agreements. Until then, employers need to be cautious about arbitration agreements that preclude class actions.