As reported in The Recorder, (subscription required) the National Labor Relations Board has filed a formal complaint against 24 Hour Fitness, alleging the gym company’s arbitration opt-out policy compels employees to waive their rights to utilize the civil litigation system, and in particular, class actions.

According to The Recorder, 24 Hour Fitness requires employees to opt out of the mandatory arbitration agreement within 30 days of receiving the employee handbook. Opting out requires the employee to request a form and then mail it in.

The NLRB alleges this policy is coercive and constitutes a violation of the protections guaranteed by the National Labor Relations Act.

The NLRB has previously found that mandatory arbitration clauses violate federal labor law — a decision now on appeal.  See D.R. Horton Inc., 374 NLRB No. 184 (the employer, a home building company, violated Section 8(a)(1) of the Act by maintaining, as a condition of employment, a mandatory arbitration agreement that did not allow its employees to file joint, class, or collective employment-related claims in any forum, arbitral or judicial.)

Arbitration has a long history.  Sir Edward Coke’s report in Vynior’s Case (1609) was the first published decision about arbitration in our jurisprudence, but in fact it is older than English common law itself.  Indeed, Romans and even the ancient Egyptians utilized it.

For many years in the early history of our country, the American judiciary viewed this method of dispute resolution with hostility.  But that ended with the passage of the Federal Arbitration Act in 1925 (“FAA”), when Congress announced a complete reversal of the governmental attitude towards arbitration, signaling a rejection of “generalized attacks on arbitration” that “res[t] on suspicion of arbitration as a method of weakening the protections afforded in the substantive law to would-be complainants.”  Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 30 (1991).

Thus, the FAA established a governmental policy favoring arbitration and requiring the rigorous enforcement of agreements to arbitrate, preempting contrary state law.

The seasaw is now moving in the other direction, with Federal authorities viewing arbitration agreements as a hindrance to the rights of employees to form classes and utilize the court system.

Barger & Wolen will continue to follow developments in this area.