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Arbitration Agreement Mandating Confidentiality of Proceedings Is Lawful Under the NLRA: NLRB
Practical Law Legal Update w-026-1837 (Approx. 6 pages)
Arbitration Agreement Mandating Confidentiality of Proceedings Is Lawful Under the NLRA: NLRB
by Practical Law Labor & Employment
| Published on 23 Jun 2020 • USA (National/Federal) |
In California Commerce Club, Inc., the National Labor Relations Board (NLRB) held that arbitration agreements requiring arbitration proceedings to be kept confidential do not violate the National Labor Relations Act (NLRA) and may be enforced by their terms under the Federal Arbitration Act (FAA), overruling contrary past precedent.
On June 19, 2020, in California Commerce Club, Inc., the panel (Board) heading the NLRB's judicial functions held that an arbitration agreement providing that "arbitration shall be conducted on a confidential basis and there shall be no disclosure of evidence or award/decision beyond the arbitration proceeding" was lawful under the NLRA and may be enforced according to its terms under the Federal Arbitration Act (FAA). Specifically, the Board:
- Noted that:
- the US Supreme Court has held that just as parties may limit by contract the issues which they will arbitrate, they may specify by contract the "rules under which the arbitration will be conducted" (Volt Info. Sciences, Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 479 (1989));
- the enforceability of employment dispute arbitration agreements, including those that contain provisions that might affect employees' exercise of their rights under the NLRA is governed by the FAA (Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018); for more information on Epic Systems, see Legal Update, SCOTUS: Arbitration Agreements with Class Action Waivers Must Be Enforced as Written, and NLRA Does Not Command Otherwise);
- in Epic Systems, the US Supreme Court distinguished the activities listed in Section 7 (including forming, joining, and assisting unions or engaging in other concerted activities for mutual aid or protection), which are things employees "just do" when exercising their rights to free association in the workplace from the highly regulated, courtroom-bound activities of class and joint litigation (138 S. Ct. at 1625);
- consistent with the US Supreme Court's decision in Epic Systems, the NLRA does not contain an express congressional command to displace the FAA concerning contractual confidentiality provisions;
- discussing terms and conditions of employment with coworkers is at the heart of protected Section 7 activity employees just do (St. Margaret Mercy Healthcare Ctrs., 350 N.L.R.B. 203, 205 (2005)); and
- the Board carefully analyzes the terms and scope of disputed confidentiality provisions and takes into account the interests implicated and the NLRA's policies (compare Macy's, Inc., 365 N.L.R.B. No. 116 (Aug. 14, 2017) (rule restricting disclosure of confidential information from employer's own files was lawful) with Boeing Co., 365 N.L.R.B. No. 154, slip op. at 15 (Dec. 14, 2017) (rule prohibiting employees from discussing wages or benefits with one another was unlawful)); the Board has held that under Epic Systems, an employer may promulgate, maintain, and enforce individual arbitration agreements, including agreements in response to opt-in activity, but 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 (Cordua Rests., Inc., 368 N.L.R.B. No. 43, slip. op. at 3 (Aug. 14, 2019); see Legal Update, NLRB Decides First Mandatory Arbitration Case and Issues of First Impression Following Supreme Court's Epic Systems Decision).
- Held that:
- the FAA may shield arbitration agreements with confidentiality provisions that set rules by which the arbitration will be conducted but does not shield confidentiality requirements that extend beyond the scope of the arbitration proceeding itself and interfere with what employees "just do" for themselves when exercising their right to free association in the workplace. The NLRB must assess the latter type of confidentiality provision under the standards it generally applies to employer confidentiality rules;
- employees communicating with each other about events, facts, and circumstances they either know about firsthand or have heard about from their colleagues is something employees "just do" for themselves when exercising their right to free association in the workplace; employees disclosing an arbitral award, or disseminating evidence or information obtained solely by participating as a party in an arbitral proceeding, are not;
- the arbitration agreement in this case, when reasonably read, did not go beyond setting rules by which the arbitration is to be conducted or interfere with what employees "just do" when exercising their rights to free association in the workplace under the NLRA;
- any confidentiality provision purporting to impose confidentiality requirements on unfair labor practice (ULP) proceedings before the Board would be unenforceable and in violation of the NLRA, even where included in an arbitration agreement; and
- consistent with Cordua Restaurants, notwithstanding the existence of an enforceable arbitration agreement mandating the confidentiality of arbitration proceedings, an employer would violate Section 8(a)(1) of the NLRA if it disciplined or discharged an employee for discussing protected terms and conditions of employment in violation of the confidentiality provision.
- Overruled its prior decisions, including the following precedent to the extent that they are inconsistent with the Board's holding:
- Professional Janitorial Service of Houston, 363 N.L.R.B. No. 35 (Nov. 24, 2015) (finding unlawful a confidentiality provision requiring statements made and information revealed during arbitration are confidential); and
- Jack in the Box, Inc., 364 N.L.R.B. No. 12 (May 24, 2016) (finding unlawful a provision requiring the arbitrator's award be kept confidential).
The Board's decision in California Commerce Club confirms that, consistent with Epic Systems, mandatory arbitration agreements requiring employment-related disputes to be arbitrated on a confidential basis are valid and enforceable under the FAA and do not violate the NLRA. However, arbitration agreements cannot prohibit employees from discussing workplace matters of mutual concern, even where those matters are also the subject of an arbitration proceeding. Finally, while employers may lawfully maintain arbitration agreements requiring arbitration proceedings to be kept confidential, employers may not discharge or discipline employees for a Section 7-protected disclosure even where that disclosure violates an arbitration agreement's confidentiality provision. Rather, the employer must seek enforcement of the arbitration agreement by its terms by an arbitrator or a court.