Handbook Rule Requiring Employees to Waive Right to Engage in Class Litigation Violates Section 7: NLRB | Practical Law

Handbook Rule Requiring Employees to Waive Right to Engage in Class Litigation Violates Section 7: NLRB | Practical Law

In Logisticare Solutions, Inc., the National Labor Relations Board (NLRB) held that an employer's maintenance of a class action waiver rule in its handbook violated the National Labor Relations Act (NLRA).

Handbook Rule Requiring Employees to Waive Right to Engage in Class Litigation Violates Section 7: NLRB

by Practical Law Labor & Employment
Published on 05 Jan 2016 • USA (National/Federal)
In Logisticare Solutions, Inc., the National Labor Relations Board (NLRB) held that an employer's maintenance of a class action waiver rule in its handbook violated the National Labor Relations Act (NLRA).
In Logisticare Solutions, Inc., a majority of the panel (Board) heading the NLRB's judicial functions held that an employer violated Section 8(a)(1) of the NLRA by maintaining a rule in its employee handbook that required employees to waive their right to bring class or collective action lawsuits against their employer. Unlike the rules the Board held unlawful in D.R. Horton and Murphy Oil, the rule in this case was not part of an arbitration agreement. Nevertheless, the majority of the three-member Board panel relied on its recent decision in Convergys Corp., finding that the rule would reasonably be interpreted as restricting employees from filing NLRB unfair labor practice (ULP) charges. (363 NLRB No. 85 (Dec. 24, 2015.)

Background

Logisticare maintained a rule in its employee handbook and in a packet distributed to new employees that required employees to waive their right to:
  • Bring class and collective action lawsuits against Logisticare.
  • Serve as a class representative in any class action lawsuit against Logisticare.
An administrative law judge (ALJ) found that the rule violated the NLRA. Logisticare excepted to the ALJ’s decision.

Outcome

The majority of the three-member Board panel (Chairman Pearce and Member McFerran) affirmed the ALJ's decision, holding that:
  • Logisticare violated Section 8(a)(1) of the NLRA by maintaining a rule requiring employees to waive their right to bring class and collective action lawsuits.
  • Although the rule was not part of an arbitration agreement like the rules found unlawful in D.R. Horton and Murphy Oil, it still violated the NLRA because it:
    • expressly prohibited employees from engaging in protected, concerted activity; and
    • would reasonably be interpreted by employees as interfering with their right to file NLRB charges.
    (357 NLRB No. 184 (2012); 361 NLRB No. 72 (2014).)
The Board majority noted that in Convergys Corp., the same Board majority:
  • Held that an employer violates Section 8(a)(1) when it conditions employment on a requirement that employees waive their right to pursue litigation against the employer.
  • Found unlawful a rule requiring all job applicants, as a condition of becoming employed, to agree:
    • to pursue claims and lawsuits only on an individual, not a class, basis; and
    • not to lead or join a class or group lawsuit.
  • Noted that the NLRA gives employees the right to pursue joint, class, or collective claims without the employer interfering with that right (Murphy Oil USA, Inc., 361 NLRB No. 72).
  • Rejected Member Miscimarra's dissent that the class action waiver was voluntary, finding that the waiver was mandatory because applicants could either agree to the waiver or would not become employed.
    (363 NLRB No. 51 (Nov. 30, 2015).)
The Board majority found that:
  • Logisticare's rule was not part of an arbitration agreement and therefore did not raise issues related to the Federal Arbitration Act (FAA).
  • Like the rule in Convergys Corp., which also was not part of an arbitration agreement, Logisticare's rule expressly required employees to waive their right to pursue class or group litigation and therefore restricted Section 7 protected activities.
  • Employees would reasonably interpret the rule as interfering with their right to file NLRB charges because:
    • non-lawyers would consider an unfair labor practice (ULP) charge to be a type of lawsuit; and
    • an ambiguity between Logisticare's rule referencing "lawsuits" and a heading in its new employee packet that only referenced "class/collective action" without referencing lawsuits would lead a reasonable employee to think that he would be violating the class/collective action prohibition if he filed an NLRB charge on other employees' behalf.
  • The dissent was incorrect that reasonable employees would interpret Logisticare's rule as addressing procedures, and not as interfering with their right to file NLRB charges.
Member Miscimarra dissented, repeating almost verbatim much of his dissent from Convergys Corp. and also echoing points from his partial dissent in Murphy Oil. Miscimarra noted that:
  • Logisticare's rule was not unlawful because it did not interfere with employees':
    • Section 7 rights to engage in protected concerted activity; or
    • right to file NLRB charges.
  • The class and collective action waiver in this case was voluntary and was not rendered involuntary because the employer conditioned employment on employees signing the waiver.
  • An NLRB proceeding is not a lawsuit and the class action waiver in this case could not reasonably be interpreted as interfering with employees' right to file NLRB charges.
  • The NLRB lacks authority to dictate procedures by which non-NLRA claims will be litigated. Those procedures are dictated by the statutes applying to those claims.
  • Employees' NLRA-protected right to pursue grievances individually allows employees to waive class or collective action procedures on non-NLRA claims.

Practical Implications

The NLRB's decision in Logisticare applies the Board's reasoning from D.R. Horton and Murphy Oil (cases involving arbitration agreements) to invalidate a class action waiver rule appearing in an employment handbook and new employee packet. The Board reaffirms its decision in Convergys Corp. that requiring employees, as a condition of employment, to waive their right to pursue class and collective actions is an express restriction on Section 7 protected concerted activities and also would be interpreted by reasonable employees as restricting their right to file NLRB charges. The Board majority shows no sign of wavering on this issue, despite Member Miscimarra's repeated dissents.
UPDATE: On August 9, 2017, the US Court of Appeals for the Fifth Circuit granted Logisticare's petition for review and denied the Board's cross-petition for enforcement. The court found that:
  • Binding precedent in Convergys Corp. v. NLRB holds that Section 7 does not confer a substantive right to participate in class or collective action litigation, and therefore, the Board erred in concluding that the waiver violated Section 8(a)(1) explicitly ( 5th Cir. (Aug. 7, 2017)).
  • Employees could not reasonably interpret the waiver as prohibiting them from filing Board charges because the waiver language did not contain generic references to "claims" or "disputes," but rather, specifically referred to "trial lawyers," "trial by jury" and "lawsuits."
    ( (Aug. 9, 2017).)

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.)