Compelling Individual Arbitration Violates National Labor Relations Act? It Does According to ALJ

by Orrick - Global Employment Law Group
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Joining the ever growing list of opinions on the arbitrability of class claims, an NLRB Administrative Law Judge recently ruled that an arbitration agreement that did not expressly bar workers from bringing class or collective actions still violated federal labor law because the employer’s steps taken to enforce the agreement in court had the practical effect of doing so.

In Leslie’s Poolmart, Inc. & Keith Cunningham, Case No. 21-CA-102332, the employee (“Cunningham” or Claimant) worked as a retail assistant store manager in Leslie’s Poolmart, Inc. (“Leslie’s”) pool and spa supplies company. Leslie’s maintained a “Mutual Agreement to Arbitrate Claims” (the “Agreement”) that required employees to resolve certain employment-related disputes exclusively through binding arbitration. The Agreement did not, on its face, limit an employee’s employment related claims to individual arbitration. It also did not expressly prohibit an employee’s right to assert class wide, collective, or representative actions in an arbitral or judicial forum.

After his separation, Cunningham filed a wage and hour class, collective, and representative action complaint against Leslie’s. In response, Leslie’s filed a motion to compel arbitration of Cunningham’s individual claims and to dismiss his class, collective, and representative action claims on the basis that its arbitration policy was silent as to class-wide arbitrability. See Stolt-Nielson S.A. v. AnimalFeeds Int’l Corp, 130 S. Ct. 1758, 1175 (2010) (class-wide arbitration is forbidden unless the parties have affirmatively and expressly agreed to it).

While Leslie’s motion to compel was pending, Plaintiff’s counsel filed an unfair labor practice complaint alleging that Leslie’s arbitration policy violated Section 8(a)(1) of the National Labor Relations Act (“NLRA”). Relying on the NLRB’s decision in D.R. Horton, Inc., 357 NLRB No. 184 (2012), Claimant argued that by moving to compel only individual claims and dismissing all class claims, Leslie’s motion to compel had the effect of precluding concerted collective action.

Leslie’s responded by arguing, among other things, that the Board lacked jurisdiction when it decided D.R. Horton and thus the decision was invalid based on the ruling in Noel Canning v. NLRB, 705 F.3d 490 (D.C. Cir. 2013), cert granted, 81 U.S.L.W. 3695 (U.S. June 24, 2013) (No. 12-1281) and that the Board’s decision in D.R. Horton is wrongly decided.

In finding a violation of the NLRA, the ALJ first noted that the Board has repeatedly rejected the argument that it lacked the requisite three-board member authority to render binding decisions. Despite the D.C. Circuit’s ruling in Noel Canning and the Fourth Circuit’s more recent ruling in NLRB v. Enterprise Leasing Co. Southweast, LLC, 722 F.3d 609 (4th Cir. 2013), the ALJ concluded that because the issue of recess appointments “remains in litigation, and pending a definitive resolution, the Board is charged to fulfill its responsibilities under the Act.” See G4S Regulated Security Solutions, 359 NLRB No. 101, slip op. at 1 fn. 1 (2013), citing Belgrove Post Acute Care Center, 359 NLRB No. 77, slip op. at 1 fn. 1 (2013).

Further, even in the face of mounting federal court decisions to the contrary, the ALJ rejected Leslie’s arguments and noted that D.R. Horton remained the controlling Board precedent binding on ALJs. Manor West, Inc., 311 NLRB 655, 667 fn. 43 (1993); see also Waco, Inc., 273 NLRB 746, 749 fn. 14 (1984) (“We emphasize that it is a judge’s duty to apply established Board precedent which the Supreme Court has not reversed. It is for the Board, not the judge, to determine whether precedent should be varied.”) (citation omitted).

After concluding that the employer had violated the NLRA, the ALJ ordered the company to cease and desist from:

  • Maintaining and enforcing a policy that waives the right to maintain class or collective actions in all forums, whether arbitral or judicial;
  • Seeking court action to enforce its policy.

While there is little comfort in the ALJ’s ruling, this opinion is not the last chapter in this saga. Employers should be encouraged by the growing rejection of D.R. Horton by federal courts as well as potential pro-employer guidance on this issue potentially forthcoming from the Supreme Court.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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