Ambiguous NLRA Disclaimer Did Not Save Arbitration Policy: NLRB | Practical Law

Ambiguous NLRA Disclaimer Did Not Save Arbitration Policy: NLRB | Practical Law

In Ralph's Grocery Company, the National Labor Relations Board (NLRB) continued to hold that employers violate the National Labor Relations Act (NLRA) by maintaining and enforcing mandatory arbitration policies that include, as an employment condition, a waiver of class and collective action rights. One sentence in the policy stating that the filing of charges with the NLRB is permitted is not enough to remove the likelihood that employees would reasonably feel confused about whether they possess this right, given the policy's prominent mentions of mandatory arbitration.

Ambiguous NLRA Disclaimer Did Not Save Arbitration Policy: NLRB

Practical Law Legal Update w-001-4655 (Approx. 8 pages)

Ambiguous NLRA Disclaimer Did Not Save Arbitration Policy: NLRB

by Practical Law Labor & Employment
Law stated as of 08 May 2020 • USA (National/Federal)
In Ralph's Grocery Company, the National Labor Relations Board (NLRB) continued to hold that employers violate the National Labor Relations Act (NLRA) by maintaining and enforcing mandatory arbitration policies that include, as an employment condition, a waiver of class and collective action rights. One sentence in the policy stating that the filing of charges with the NLRB is permitted is not enough to remove the likelihood that employees would reasonably feel confused about whether they possess this right, given the policy's prominent mentions of mandatory arbitration.
On February 23, 2016, in Ralph's Grocery Company, the panel (Board) heading the NLRB's judicial functions held once again that an employer violated the NLRA by maintaining and enforcing a mandatory arbitration policy that included, as a condition of employment, a class and collective action waiver. This time, the Board held that while the policy included a sentence noting the employees' right to file charges with the Board, employees can reasonably be confused about whether they can do so because of the policy's prominent emphasis on the use of mandatory arbitration as the sole option for dispute resolution. (363 N.L.R.B. No. 128 (Feb. 23, 2016).)

Background

Ralph's Grocery Company (Ralph's) maintained and enforced a Mediation and Binding Arbitration Policy (MBAP) , that required employees, as an employment condition, to waive their rights to pursue class or collective collections in employment-related claims in all arbitral or judicial forums and to pursue binding arbitration to resolve disputes.
Paragraph of the MBAP stated, in part:
"[T]his Arbitration Policy is the exclusive mechanism for formal resolution of disputes and awards of relief that otherwise would be available to Employees or the Company in a court of law or equity or in an administrative agency."
Paragraph 2 of the MBAP stated, in part:
"[T]his Arbitration Policy does not apply to claims or disputes arising out of the terms and conditions of the CBA (referred to in this Arbitration Policy as "Excluded Disputes"), but does apply to and require final and binding arbitration of such Employees' (and all other Employees') individual statutory claims or disputes. Except for Excluded Disputes, this Arbitration Policy applies to any and all other employment-related disputes that exist or arise between Employees and Ralphs (or any of them) that would constitute cognizable claims or causes of action in a federal, state or local court or agency under applicable federal, state or local laws (referred to in this Arbitration Policy as "Covered Disputes"). … If any Employee or Ralphs (or any of them) wishes to initiate or participate in formal proceedings to resolve any Covered Disputes, the Employee or Ralphs (or any of them) must submit those Covered Disputes to final and binding arbitration as described in this Arbitration Policy. The Company therefore agrees to arbitrate any Covered Disputes, whether initiated by an Employee or by the Company. Only Covered Disputes can be arbitrated this Arbitration Policy."
Paragraph 4 of the MBAP stated, in part:
"… Both Ralphs and Employees must submit any and all such Covered Disputes to final and binding arbitration before a neutral Qualified Arbitrator (as defined herein) under and pursuant to this Arbitration Policy."
Paragraph 6 of the MBAP stated:
"This Arbitration Policy does not prevent or excuse any Employee or Ralphs (or any of them) from satisfying any applicable statutory conditions precedent or jurisdictional prerequisites to pursuing their Covered Disputes by, for example, filing administrative charges with or obtaining right to sue notices or letters from federal, state, or local agencies. However, final and binding arbitration as described in this Arbitration Policy is the sole and exclusive remedy or formal method of resolving the Covered Disputes. If there is no applicable statutory condition precedent or jurisdictional prerequisite to pursuing a Covered Dispute, all parties must proceed directly to arbitration under and pursuant to this Arbitration Policy. Notwithstanding any other provision of this Arbitration Policy all Employees retain the right under the National Labor Relations Act ("NLRA") to file charges with the National Labor Relations Board ("NLRB"), and to file charges with the United States Equal Employment Opportunity Commission ("EEOC") under federal equal employment opportunity laws within the EEOC's administrative jurisdiction."
Paragraph 7 of the MBAP stated:
" [T]here is no right or authority for Covered Disputes to be heard or arbitrated on a class action basis, as a private attorney general, or on bases involving claims or disputes brought in a representative capacity on behalf of the general public, of other Ralph's employees (or any of them), or of other persons alleged to be similarly situated."

Outcome

A majority (Chairman Pearce and Member McFerran) of a three-member Board panel affirmed an administrative law judge (ALJ's) findings that Ralph's violated Section 8(a)(1) of the NLRA by:
  • Maintaining and enforcing the MBAP requiring employees to waive their rights to bring employment-related class or collective action claims.
  • Interfering with employees' right to file charges with the Board.
  • Maintaining a confidentiality provision in the MBAP that prohibited employees from discussing terms and conditions of employment.
The Board noted that:
The Board found that:
  • Paragraphs Two and Four of the MBAP emphasized that all employment-related disputes must be resolved through final binding arbitration.
  • Although the last sentence of Paragraph Six allowed for charges to be filed with the Board, sentences earlier in the paragraph stated that arbitration was the sole forum for employment dispute resolution. Read together, this paragraph would reasonably confuse employees and lead them to believe that although they could file charges with the Board, the ultimate decision lied with the arbitrator.
  • The MBAP, as a whole, strongly emphasized that the policy applied to all claims before any court or agency, and only briefly mentioned (in Paragraph Six) that employees can file charges. This sentence in Paragraph Six was not enough to save the MBAP from violating Section 8(a)(1).
  • Ralph's employment application contained a summary of the MBAP that noted the waiver of the right to resolve disputes before a federal court of agency, but failed to reference the right to file charges with the Board. This could lead employees to reasonably believe that the MBAP interfered with their right to a resolution by the Board.
  • A union, as the employees' bargaining representative, may reach agreement with an employer to arbitrate unfair labor practice (ULP) claims, but such an agreement cannot limit the ultimate authority of the Board. Requiring an unrepresented employee to arbitrate ULPs would run contrary to the NLRA's policies.
  • Ralph's MBAP confidentiality rule violated 8(a)(1) since it prohibits the employees' discussion of their terms and conditions of employment.
Member Miscimarra:
  • Concurred with the majority that the MBAP confidentiality rule violated Section 8(a)(1) of the NLRA.
  • Dissented from the majority's holdings that Ralph's had violated Section 8(a)(1) of the NLRA:
    • based on the MBAP's inclusion of a class and collective action waiver regarding non-NLRA employment claims;
    • based on the MBAP's interference with employees' rights to file charges with the Board; and
    • by enforcing the MBAP by compelling employees to arbitrate their claims.
  • Argued that (aside from the MBAP's confidentiality clause) Ralph's did not violate the NLRA by enforcing an arbitration clause and that the majority of courts have rejected the Board's position concerning class-waiver agreements.

Practical Implications

Ralph's Grocery Company adds to the D.R. Horton and Murphy Oil line of cases by providing an example of what is not enough to "save" a policy. The employer's inclusion of one sentence stating that filing charges with the Board was permitted was insufficient to overcome the potential confusion that a reasonable employee may encounter when reading that statement as part of the whole policy which repeatedly emphasized the requirement that arbitration be used to resolve disputes. According to the Board, if an employee would reasonably understand the policy as prohibiting him from filing ULP charges with the Board, the policy has violated the NLRA.

UPDATE

In Epic Systems Corp. v. Lewis, the US Supreme Court held that arbitration agreements with class and collective action waivers are not prohibited under Section 7 of the NLRA and must be enforced as written under the Federal Arbitration Act (FAA). The decision invalidates the NLRB's analysis in D.R. Horton and Murphy Oil on which this decision relies and therefore abrogates much of the analysis in this case (( (U.S. May 21, 2018); see Legal Update, SCOTUS: Arbitration Agreements with Class Action Waivers Must Be Enforced as Written, and NLRA Does Not Command Otherwise and Article, Expert Q&A on Class Action Waivers in the Employment Context.)

UPDATE

On May 8, 2020, in Anderson Enterprises, Inc., the Board overruled its pre-Epic and pre-Boeing analysis of arbitration agreement savings clauses, including in Ralph's Grocery Co. (369 N.L.R.B. No. 70 (May 8, 2020)).