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November 19, 2019 Practice Points

Epic Systems Did Not Take the National Labor Relations Board “Out of the Picture”

Employers must remain careful of their employees’ rights under the National Labor Relations Act.

By Robert Arrington

We all know, don’t we, that last year the Supreme Court held, in Epic Systems Corp. v. Lewis, 584 U.S.____, 138 S. Ct. 1612 (2018), “that agreements containing class- and collective action waivers and stipulating that employment disputes are to be resolved by individualized arbitration do not violate the National Labor Relations Act [NLRA] and must be enforced as written pursuant to the Federal Arbitration Act.” In re Cordua Restaurants, Inc., 368 NLRB No. 43 at p. 1 (August 14, 2019).

So that being the case, employers are free to adopt mandatory arbitration agreements for their employees without worrying about the National Labor Relations Board getting in their way, right? Well, not quite. Epic Systems did not take away employees’ right to engage in protected concerted activity under Section 7 of the NLRA, or file charges of unfair labor practices under Section 8. As two recent decisions of the board illustrate, employers must remain careful of their employees’ rights under the NLRA.

The first decision is the Cordua Restaurants opinion quoted above. The employer maintained a company-wide dispute resolution plan in which all of its employees were required to sign agreements to arbitrate claims individually. Three of its employees ignored their agreements and filed collective actions for unpaid overtime compensation under the Fair Labor Standards Act. The employer fired them.

The employees filed charges of unfair labor practices against Cordua Restaurants. They had three contentions. First, they claimed that the employers’ mandatory ADR plan was void as retaliation for exercise of their Section 7 rights because it was not adopted until after certain employees had opted into an existing collective action. Secondly, they claimed that the employer had violated its employees Section 7 rights because it had announced that anyone who did not sign the required arbitration agreement would be fired. Finally, they contended that opting into or bringing a collective action was protected activity for which they could not be discharged.

The board rejected the first two contentions but not the third. It explained that, in taking the first two steps, the employer was only doing what the Supreme Court said it could. But it also held that in filing the suit, the employees were engaged in “protected concerted activity.” Thus, firing them was an unfair labor practice. The board ordered the employees reinstated.

What should Cordua Restaurants have done instead of discharging the employees who ignored their signed agreements to arbitrate? That’s simple, the board said. It should have filed motions in the court in which the collective action was pending, asking the judge to compel arbitration.

The other case is In re Beena Beauty Holding, Inc. d/b/a Planet Beauty, 368 NLRB No. 91 (October 8, 2019). As in Cordua Restaurants, the employer, Planet Beauty, required its employees to sign agreements to individually arbitrate employment claims. The only exceptions permitted were unemployment and workers’ compensation claims. There was no exception for filing charges of unfair labor practices under the NLRA mentioned in the form agreement presented to the employees.

That omission, said the board, is itself an unfair labor practice. Even though the arbitration agreement did not expressly prohibit the filing of a charge under Section 8, a reasonable employee could have interpreted the agreement to preclude the filing of a charge. The board therefore required the employer to rescind or amend its ADR plan, and to tell its employees it was doing so.

Practice Pointers

What can employers and employment attorneys learn from these cases?

First, they are a reminder that the NLRA applies to everyone, and not just “union shops”. Secondly, ADR plans that include agreements to arbitrate should always contain a clear “carve out” for charges of unfair labor practices, just as they should contain a carve out for charges filed with the EEOC. And finally, an employee’s failure to abide by his or her arbitration agreement should be handled by seeking relief in court, and not by unilaterally punishing the recalcitrant employee.

Robert Arrington is an attorney and chairman of Employment and Litigation Sections at Wilson Worley in Kingsport, Tennessee.

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