Arbitration Agreement That Makes Arbitration the Exclusive Forum for Resolving All Claims Is Unlawful Category 3 Rule Under Boeing: NLRB | Practical Law

Arbitration Agreement That Makes Arbitration the Exclusive Forum for Resolving All Claims Is Unlawful Category 3 Rule Under Boeing: NLRB | Practical Law

In Prime Healthcare Paradise Valley, LLC, the National Labor Relations Board (NLRB) held that under the Boeing balancing standard, an arbitration agreement that requires arbitration as the only form of resolution for claims is an unlawful Category 3 rule in violation of Section 8(a)(1) of the National Labor Relations Act (NLRA).

Arbitration Agreement That Makes Arbitration the Exclusive Forum for Resolving All Claims Is Unlawful Category 3 Rule Under Boeing: NLRB

by Practical Law Labor & Employment
Law stated as of 02 Aug 2023 • USA (National/Federal)
In Prime Healthcare Paradise Valley, LLC, the National Labor Relations Board (NLRB) held that under the Boeing balancing standard, an arbitration agreement that requires arbitration as the only form of resolution for claims is an unlawful Category 3 rule in violation of Section 8(a)(1) of the National Labor Relations Act (NLRA).
NOTE: See the UPDATE at the end of this resource for subsequent developments affecting this decision.
On June 18, 2019, in Prime Healthcare Paradise Valley, LLC, the panel (Board) heading the NLRB's judicial functions unanimously concluded that:
  • Applying the balancing standard under Boeing, a facially neutral arbitration agreement requiring arbitration as the exclusive form of resolving any claim is an unlawful Category 3 rule, a rule the NLRB designates as unlawful to maintain, because:
    • it prohibits or limits NLRA-protected conduct; and
    • the adverse impact on NLRA rights is not outweighed by justifications associated with the rule.
  • The employer's arbitration agreement, when reasonably interpreted, restricts the filing of charges with the NLRB in violation of Section 8(a)(1) of the NLRA, and that no legitimate justification outweighs, or could outweigh, the adverse impact of these provisions on employee rights under the NLRA.
(368 N.L.R.B. No. 10 (June 18, 2019).)
The practical implications of the Board's decision affect those employers drafting new arbitration agreements or reviewing existing agreements. Although the Supreme Court in Epic Systems held that individual arbitration agreements containing class and collective action waivers do not violate the NLRA and should be enforced as written, Epic Systems did not address whether the NLRA prohibits agreements that restrict employees' access to the NLRB or its processes (see Epic Systems Corp. v. Lewis, 138 S. Ct. 1612, 1631 (2018)). In light of the Board's holding that these agreements do violate the NLRA, when drafting and reviewing arbitration agreements, employers should:
  • Not expressly prohibit employees from filing charges with the Board or, more generally, with administrative agencies.
  • Ensure that arbitration agreements that are facially neutral cannot be read to interfere with employees' ability to file unfair labor practice charges with the NLRB (for example, by requiring that "all claims or controversies" be resolved by binding arbitration).
  • Make clear that the arbitration agreement does not bar or restrict employees' right to file charges with the NLRB.
  • Understand that no legitimate justification can validate an arbitration agreement that makes arbitration the exclusive forum for the resolution of all claims.

UPDATE

On August 2, 2023, a Board majority adopted a new burden-shifting standard for evaluating facial challenges to employer work rules that do not expressly restrict employees' protected concerted activity under Section 7 of the NLRA, overruling Boeing and the subsequent work rules decisions applying the categorical classification system articulated therein (Stericycle, Inc., 372 N.L.R.B. No. 113 (Aug. 2, 2023); for more information on this decision, see Article, The NLRB's New, Developing Standard for Assessing Lawfulness of Work Rules).