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Eighth Circuit Rejects NLRB Position that Arbitration Agreement Class Waivers Violate NLRA But Finds Agreement Unlawful
Practical Law Legal Update w-002-5493 (Approx. 6 pages)
Eighth Circuit Rejects NLRB Position that Arbitration Agreement Class Waivers Violate NLRA But Finds Agreement Unlawful
by Practical Law Labor & Employment
| Published on 07 Jun 2016 • USA (National/Federal) |
In Cellular Sales of Missouri, LLC v. NLRB, the US Court of Appeals for the Eighth Circuit rejected the National Labor Relations Board's (NLRB) position that arbitration agreements with class action waivers violate Section 8(a)(1) of the National Labor Relations Act (NLRA), but held that the specific arbitration agreement at issue was unlawful because employees would reasonably construe it to bar or restrict their rights to file charges with the NLRB.
On June 2, 2016, in Cellular Sales of Missouri, LLC v. NLRB, the US Court of Appeals for the Eighth Circuit (Eighth Circuit) rejected the NLRB's position that arbitration agreements with class action waivers violate Section 8(a)(1) of the NLRA, an issue on which the circuits are split. The Eighth Circuit nonetheless held that the arbitration agreement at issue in this case violated Section 8(a)(1) because employees would reasonably understand it to restrict their rights to file unfair labor practice (ULP) charges with the NLRB. ( (8th Cir. June 2, 2016).)
Background
In January 2012, the employer required a group of employees to sign, as a condition of employment, an arbitration agreement with the following language:
"All claims, disputes, or controversies arising out of, or in relation to this document of Employee's employment with Company shall be decided by arbitration … Employee hereby agrees to arbitrate any such claims, disputes, or controversies only in an individual capacity and not as a plaintiff or class member in any purported class, collective action, or representative proceeding."
A former employee who had signed the arbitration agreement later filed a lawsuit in federal district court alleging FLSA violations on behalf of himself and others similarly situated. After the employer moved to dismiss the lawsuit and compel arbitration based on the arbitration provision, the employee filed a ULP charge.
The panel (Board) heading the NLRB's judicial functions:
- Applied two of its previous decisions, Murphy Oil USA, Inc. and D.R. Horton, Inc., to hold that the arbitration agreement violated Section 8(a)(1) of the NLRA by unlawfully interfering with employees' Section 7 rights to participate in class actions (see 361 N.L.R.B. No. 72 (Oct. 28, 2014) and 357 N.L.R.B. No. 184 (Jan. 3, 2012)).
- Held that the arbitration agreement violated Section 8(a)(1) because it contained broad language that employees would understand to restrict their rights to file ULP charges or access the NLRB's processes.
The employer petitioned the Eighth Circuit for review, and the NLRB cross-petitioned for enforcement.
Outcome
The Eighth Circuit:
- Relied on its previous decision in Owen v. Bristol Care, Inc. to reject the NLRB's position that arbitration agreements with class action waivers violate Section 8(a)(1) of the NLRA (702 F.3d 1050, 1053-55 (8th Cir. 2013); see Legal Update, Eighth Circuit holds that class action waiver provisions are enforceable in Fair Labor Standards Act Claims).
- Held that the employer's attempt to enforce the class action waiver through a motion to dismiss and compel arbitration also did not violate section 8(a)(1).
- Affirmed the Board's holding that the arbitration agreement at issue in this case violated Section 8(a)(1) because employees would reasonably understand it to restrict their rights to file ULP charges, finding the agreement's language similar in breadth and generality to arbitration agreements the Board previously found unlawful, including those where the agreement:
- stated that it did not constitute a waiver of an employee's obligation to file a timely charge with the NLRB (Bill's Electric, Inc., 350 N.L.R.B. 292, 296 (2007));
- required arbitration of "any other legal or equitable claims and causes of action recognized by local, state or federal law or regulations," even though the language did not explicitly restrict proceedings before the NLRB (U-Haul Co. of Cal., 347 N.L.R.B. 375, 377-78 (2006)); and
- stated that "all disputes" and "legal claims" were required to be arbitrated, and NLRB charges were not included in a list of exceptions (Utility Vault Co., 345 N.L.R.B. 79, 81 (2005)).
Practical Implications
There remains a circuit split on the issue of whether arbitration agreements with class action waivers unlawfully interfere with employees' Section 7 rights to participate in class actions. The Eighth Circuit reaffirms it position along with the Fifth Circuit in holding that arbitration agreements with class action waivers do not violate Section 8(a)(1) of the NLRA, while the Seventh Circuit has recently adopted the NLRB's position that these agreements do violate the NLRA (see D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013); Murphy Oil, Inc. v. NLRB, 808 F.3d 1013 (5th Cir. 2015); Lewis v. Epic Sys. Corp., (7th Cir. May 26, 2016); see also Legal Updates, Fifth Circuit Continues to Reject NLRB's Analysis of Mandatory Arbitration Agreements; NLRB Shows No Sign of Acquiescing and Seventh Circuit Pans Arbitration Pact with Class Action Waivers Based on NLRA, Creates Circuit Split).
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 affirms the Eighth Circuit's ruling that mandatory arbitration agreements with class action waivers are not per se NLRA violations. (( (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.)