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Does Your Arbitration Agreement Include a Carve-Out for Employee Access to the National Labor Relations Board? It Should.

Most employers mandating arbitration agreements as a condition of employment do not intend to prevent employees from filing unfair labor charges with the National Labor Relations Board (“Board”). But unless their agreements contain a “savings clause” making that clear to employees, they are susceptible to challenge that, at least according to the Board, could invalidate the entire agreement.

In Prime Healthcare Paradise Valley, LLC, issued on June 18, 2019, the Board held that an arbitration agreement that either explicitly prohibits, or could be reasonably interpreted as prohibiting, the filing of claims with the Board (or, more generally, with administrative agencies) is unlawful under the National Labor Relations Act (NLRA). The arbitration agreement involved did not prohibit employees from filing charges with the Board or other administrative agencies. Instead, it contained the kind of provisions that are not atypical of most arbitration agreements. It required “all claims or controversies for which a federal or state court would be authorized to grant relief” be resolved by arbitration; it stated that covered claims “include, but are not limited to” claims under a long list of federal statutes; and it provided the “purpose and effect of the agreement is to substitute arbitration as the forum for resolution of claims.” According to the Board: “Reasonably interpreted, these provisions, taken as a whole, make arbitration the exclusive forum for the resolution of all claims, including federal statutory claims” under the NLRA. The agreement thus interfered with employee rights and violated the NLRA, requiring rescission.

Fortunately, employers can avoid coming under fire for this violation without undermining their arbitration programs (unlike the Board’s last challenge to arbitration agreements – that class waivers interfered with employees’ exercise of protected rights and were prohibited by the NLRA – which the Supreme Court rejected last year in Epic Systems Corp. v. Lewis). The Board’s order gave the employer the option to rescind the agreement or revise it “to make clear to employees that [the arbitration agreement] does not bar or restrict employees’ rights to file charges” with the Board.

The bottom line is an action item for all employers with an arbitration program: Review your arbitration agreements or policies. Could they be reasonably interpreted as prohibiting employees from filing charges with the Board or other administrative agencies? If they contain provisions similar to those in Prime Healthcare, they are susceptible to this challenge. Consider revising them to include a carve-out or savings clause making clear that they do not interfere with employees’ rights to file charges with the NLRB (or other administrative agencies).

And be sure that any revised agreement is properly implemented – Prime Healthcare had revised its agreement four years earlier to include the exact kind of savings clause that the Board wanted to see, but foot-faulted in not clearly modifying or revoking its old agreements.

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This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.