Not Backing Down – Why Fight for Arbitration and Class Waivers
An arbitration agreement with workers—either
employees or independent contractors—that also prohibits class claims in those
arbitrations can help considerably in managing Fair Labor Standards Act
(“FLSA”) claims. Individual arbitrations make FLSA claims much easier to deal
with when the company is not working under the threat of a court-ordered notice
to potential class or, in FLSA speak, potential collective action members.
The National Labor Relations Board is going
after these class and collective action waivers in employment arbitration
clauses, and will probably keep at it until the Supreme Court puts a stop to it.
The Board has defiantly issued a flurry of decisions finding class and collective
action waivers in employment arbitration clauses to be unfair labor practices,
since they supposedly chill employees’ ability “to engage in . . . concerted
activities for the purpose of . . . mutual aid or protection,” and ordering
their removal, even though the Fifth Circuit has disagreed with them—twice—and
the Supreme Court strongly favors class waivers in other contexts. Anyone willing to challenge the Board’s
interpretation of this 1935 law as it applies to arbitration agreements is in
for a fight, but that fight might be well worth the risk for some companies.
Costs are more manageable and claims can be
resolved on an individual basis with a dispute resolution program. For this
reason, many companies, especially those concerned with extensive wage and hour
exposure, choose these programs and choose class or collective action waivers.
The Board doubled down at least five times on
this position. In one typical case, it ordered the
company to cease and desist its arbitration clauses since those clauses waived
collective arbitration and lawsuits.1 This rash of decisions
followed closely on the heels of the second ruling by the Fifth Circuit—which
covers Texas, Louisiana and Mississippi—flat out rejecting the Board’s
conclusion as contrary to the Federal Arbitration Act.
Given that a federal court and a federal
agency are at loggerheads, what are employers supposed to do? Some companies
should consider taking the NLRB to task and fighting to maintain their dispute
resolution programs. First, if the employer can get its case reviewed by the
Fifth Circuit, it will likely win. Second, as the Fifth Circuit pointed out,
several other courts have stated they would agree with the Fifth Circuit if
faced with the issue. This means that even if a company can’t get review in the
Fifth Circuit (based on where the business is located and where the alleged
unfair labor practice occurred), the company still has a shot at getting into a
favorable court. Third, each company with these waivers should be asking itself
whether fighting might be worth it; that is, what’s worse, the NLRB or class
actions? While this question is business specific, there are good reasons why
any business with a dispute resolution program should be asking it.
1 Citigroup Tech,
Inc.. and Citicorp Banking Corp., 363 N.L.R.B. No. 55 (Dec. 1, 2015).