December 2019 Employment Arbitration Case Developments
by louchang | Jun 17, 2020 | Newsletter |
Growing Use of Mandatory Arbitration in Employment.
A recent Cornell study has determined that employers across the country in the non-collective bargaining private sector have significantly expanded their use of mandatory arbitration provisions to compel employees to address the claims in arbitration rather than through the court system. In 1992, the use of such arbitration provisions in employment relationships was minimal, 2.9%. By the early 2000’s, that proportion rose to about 25%. By 2017, more than half (53.9%) of nonunion private-sector employers have mandatory arbitration procedures. Nationally, the study found that more than 65% of larger employers (employers with 1,000 or more employees) had mandatory arbitration provisions in their employment contracts. Among all private-sector nonunion employees, more than 56% are subject to mandatory employment arbitration procedures. The study concluded that more than 60 million workers in the American workforce are now subject to mandatory arbitration of their employment disputes.
Of the employers who require mandatory arbitration of employment disputes, more than 30% also include class-action waivers in their arbitration agreements. To access a copy of the Cornell study, you can find it at:
This growth in the use of mandatory arbitration in the employment sphere is generating legislative efforts to outlaw pre-employment mandatory arbitration such as California’s recently adopted AB 51. Query whether other states will attempt to do so as well. Query also whether such efforts will be challenged in the courts as being preempted by the Federal Arbitration Act.
Employment arbitration provisions should have explicit exclusions providing employees with notice that they are not prohibited from pursuing claims before the NLRB
(From the blog of Shawe Rosenthal LLP – Chad M. Horton)
The National Labor Relations Board recently struck down two arbitration provisions that the Board concluded restricted employee access to the agency.
In Cedars-Sinai Medical Center, the Board held that the Hospital’s arbitration clause would reasonably be read by employees to make arbitration the exclusive forum for the resolution of statutory claims, including those arising under the National Labor Relations Act (NLRA). The Board previously held such restrictions to violate Section 8(a)(1) of the NLRA in Prime Healthcare Paradise Valley (discussed in our recent blog post). In the present case, the employer contended the agreement specifically excluded from the arbitration mandate claims “preempted by federal labor laws,” and argued that this savings clause rendered the agreement lawful. The Board disagreed and adopted the principle that vague savings clauses requiring employees to “meticulously determine the state of the law,” as did this savings clause, were not sufficient to make lawful an otherwise unlawful provision. The Board concluded that the objective reasonable employee would not understand this savings clause to exclude claims under the NLRA. Accordingly, the agreement restricted employee access to the Board, and the Board found that such a restriction cannot be supported by any business justification.
In Beena Beauty Holding, Inc., the employer maintained an arbitration agreement providing that “the company and [employees] agree…to submit any claims that either has against the other to final and binding arbitration.” As in Prime Healthcare, the Board found that this rule, when reasonably interpreted, interferes with employee access to the Board. The Board noted that the agreement contained no exception for filing charges with the Board or administrative agencies, generally. Thus, taken as a whole, the agreement makes arbitration the exclusive forum for resolution of claims arising under the NLRA, which the Board has consistently found to be unlawful.
The takeaway here is simple: if your company maintains an arbitration agreement, provide an explicit exclusion in the agreement establishing that employees are not prohibited from accessing the Board to resolve claims under the NLRA.
Board Upholds Enforcement of Pre-Hire Arbitration Agreement
(From the blog of Littler Mendelson PC – Marie Duarte)
The alternative dispute resolution landscape continues to evolve for employers with unionized workforces. Anheuser-Busch, LCC, 367 NLRB 123 (May 22, 2019), is the National Labor Relations Board’s (NLRB) latest decision on the applicability of employment-related, mandatory arbitration agreements in a union context, after last year’s Supreme Court decision in Epic Systems Corp. v. Lewis.
In Anheuser-Busch, a divided three-member panel held that an employer can lawfully seek to enforce a pre-employment arbitration agreement against a former union employee, even though it had not provided the union with notice or an opportunity to bargain over the terms of the arbitration agreement.
For over 15 years, Anheuser-Busch had asked all applicants for employment, including bargaining unit members, to agree to its Dispute Resolution Program (DRP), which was different from the grievance procedure in the collective bargaining agreement between Anheuser-Busch and the union representing its employees. While the DRP excluded claims by employees against the company that were covered under the collective bargaining agreement, the company never provided the union with notice or opportunity to bargain over whether the DRP could apply to bargaining unit members.
The employee in question was a bargaining unit member covered by the collective bargaining agreement between the company and the union. In 2010, the company terminated the employee. Pursuant to the terms of the collective bargaining agreement, the union filed a grievance challenging the company’s termination decision. The employee’s termination was upheld through the grievance process, and the union grievance was dismissed without undergoing arbitration under the labor agreement.
Following the dismissal of his union grievance, the employee filed a lawsuit against the company, alleging race discrimination and retaliation. The company then moved to enforce the DRP agreement, which the employee had signed when he applied to work for the company. The employee filed a charge with the NLRB alleging that the company violated Sections 8(a)(1) and (5) of the National Labor Relations Act (NLRA) when it moved to enforce a pre-employment arbitration agreement that the company had unilaterally implemented without the union’s consent.
The company argued that it had not violated Section 8(a)(5) of the NLRA when it moved to compel arbitration, because at the time in which the employee signed the arbitration agreement, the employee in question was not a member of the bargaining unit. In other words, the company argued that it had no obligation to bargain with the union over the terms that would apply to individuals before they are hired (and become members of the bargaining unit) or after they are terminated and the labor agreement’s grievance process has been exhausted.
The administrative law judge (ALJ) dismissed this argument, holding that the company had violated the NLRA by seeking to enforce a unilateral change through its motion to compel arbitration. The NLRB overruled the ALJ’s decision, however, holding that the company’s motion to compel arbitration was a protected exercise of its First Amendment right to petition, and not a violation of Section 8(a)(5) of the NLRA. The Board concluded that employers can lawfully seek to enforce pre-hire arbitration agreements with persons who eventually became union-represented employees. Notably, the NLRB also accepted the company’s argument that a former employee whose discharge was upheld by the grievance process is no longer a statutory employee in the bargaining unit.
This decision provides employers with support for unilaterally requiring pre-hire applicants for bargaining unit positions to sign an ADR agreement before they begin work. It also supports an employer’s ability to later compel arbitration of any claim covered by that ADR agreement brought by the same individual, at least after the individual is no longer employed with the company. Although the right to move to compel arbitration of a current union-represented employee’s claims may also be a protected First Amendment right, it is unclear from the opinion if it extends to current employees or only applicants and former employees—who are not statutory bargaining unit employees. Unions often take the position that a grievance filed under a labor agreement by a union-represented employee is actually owned by the union. Given that potential problem, employers may have a more difficult time enforcing an individual arbitration agreement filed by a present union-represented employee. Perhaps that is not unduly concerning, however, given that union grievances usually are subject to arbitration anyway.
While under Anheuser-Busch companies arguably do not have an obligation to bargain with the union over the implementation of these agreements in the pre-employment process, the future of unilaterally implemented pre-employment arbitration agreements in a unionized context is not guaranteed. This decision may be appealed to the court of appeals. Moreover, the Anheuser-Busch decision was issued by a pro-arbitration, Republican-majority NLRB, the composition of which could change based on the outcome of the 2020 presidential election. For the time being, businesses should take a fresh look at how their arbitration agreements are structured and implemented to ensure that they are effectively covering claims not otherwise covered by a collective bargaining agreement. Additionally, any arbitration agreement rolled out at pre-employment to employees who will be subject to a collective bargaining agreement should probably exclude claims that are subject to a collective bargaining agreement.