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NLRB OKs Class Waivers and Allows Employers to Threaten Action Against Employees Who Refuse to Sign

August 29, 2019

Employers are not in violation of the National Labor Relations Act if they create mandatory arbitration agreements in response to employees opting into a collective action, according to a recent ruling by the National Labor Relations Board.

The NLRB decision is based on a 2018 Supreme Court ruling in Epic Systems Corp. v. Lewis. In that case, the Court held that agreements containing class and collective action waivers and requiring disputes be resolved in arbitration were permissible under the National Labor Relations Act. The Court also held that employers are free to require acceptance of such an agreement as a condition of employment.

The recent NRLB decision in Cordua Restaurants, Inc., extends Epic Systems by holding that an employer may enforce such waivers and arbitration agreements and threaten employees with discipline if they refuse those terms. It is worth noting, however, that the NRLB continued to hold that an employer cannot terminate or otherwise punish employees for participating in a collective action.

An employer must still be mindful of employees right to engage in protected concerted activity. For example, it is illegal for an employer to enforce an otherwise lawful rule that may restrict employees from approaching their employer about improving pay or discussing work-related issues beyond pay, such as safety concerns. However, the NLRB found that Section 7 of the NLRA, which protects concerted activity, does not address class or collective actions. Since a collective action is only a procedural mechanism, arbitration agreements that prohibit employees from opting into a collective action do not restrict or implicate the exercise of Section 7 rights.

Likewise, since arbitration agreements and class/collective action waivers are legal, employers are free to threaten employees that refuse to sign the agreements with disciplinary action. The NLRB said those warnings are “an explanation of the lawful consequences of failing to sign the agreement.”

The Cordua Restaurants decision suggests that the current NLRB does not view employees who join or opt into a class or collective action as engaging in protected activity. Further, the NLRB will likely view favorably individualized arbitration agreements and class or collective action waivers with respect to the federal policies favoring arbitration.