NLRB Decides First Mandatory Arbitration Case and Issues of First Impression Following Supreme Court's Epic Systems Decision | Practical Law

NLRB Decides First Mandatory Arbitration Case and Issues of First Impression Following Supreme Court's Epic Systems Decision | Practical Law

In Cordua Restaurants, Inc., the National Labor Relations Board (NLRB) held, in a matter of first impression, that the National Labor Relations Act (NLRA) does not prohibit an employer from instituting a mandatory arbitration agreement in response to employees opting in to wage and hour collective actions or notifying employees that they may be discharged for refusing to sign these agreements.

NLRB Decides First Mandatory Arbitration Case and Issues of First Impression Following Supreme Court's Epic Systems Decision

by Practical Law Labor & Employment
Law stated as at 20 Aug 2019 • USA (National/Federal)
In Cordua Restaurants, Inc., the National Labor Relations Board (NLRB) held, in a matter of first impression, that the National Labor Relations Act (NLRA) does not prohibit an employer from instituting a mandatory arbitration agreement in response to employees opting in to wage and hour collective actions or notifying employees that they may be discharged for refusing to sign these agreements.
On August 14, 2019, in Cordua Restaurants, Inc., a majority of the panel (Board) heading the NLRB's judicial functions held that:
  • In matters of first impression, the NLRA does not prohibit employers from:
    • informing employees that they will be discharged for failing to sign a mandatory arbitration agreement; or
    • promulgating mandatory arbitration agreements in response to employees opting in to a collective action under the FLSA or state wage and hour laws.
  • Longstanding Board precedent bars employers from taking adverse action against employees who engage in protected concerted legal activity, including filing a class or collective action concerning wages, hours, or other terms and conditions of employment.
(368 N.L.R.B. No. 43 (Aug. 14, 2019).)
This is the first NLRB decision addressing the lawfulness of certain employer conduct involving mandatory arbitration agreements following the US Supreme Court's decision in Epic Systems Corp. v. Lewis, which held that mandatory arbitration agreements with class and collective action waivers do not violate the NLRA (138 S. Ct. 1612 (2018); see Legal Update, SCOTUS: Arbitration Agreements with Class Action Waivers Must Be Enforced as Written, and NLRA Does Not Command Otherwise). This decision reflects the Board's broad application of Epic Systems by permitting mandatory arbitration agreements with class and collective action waivers even when the employer introduces the agreements in response to employees opting in to an FLSA collective action (or in response to other protected activity). However, employers must remember that:
  • Promulgating an otherwise lawful rule in response to protected activity may violate the NLRA in other circumstances (for example, if, unlike the mandatory arbitration agreement, the rule restricts employees' exercise of Section 7 rights).
  • An employer violates the NLRA if it disciplines or discharges employees for protected activity, such as filing or joining a class or collective legal action against their employer. Epic Systems allows an employer to promulgate, maintain, and enforce individual arbitration agreements, including agreements in response to opt-in activity, but the Supreme Court's decision does not permit an employer to discipline or discharge an employee for joining with coworkers in filing a collective action to pursue wage and hour claims.