On August 14, 2019, the National Labor Relations Board (the "Board") held that employers may require employees to waive their right to join class and collective actions – even after a claim has been filed in court – without running afoul of federal labor law. Cordua Restaurants, Inc., Cases 16-CA-160901, 16-CA-161380, 16-CA-170940, and 16-CA-173451.
Cordua Restaurants had an arbitration agreement in its employment contracts that required employees to waive their right to pursue class or collective claims against the company. In early 2015, seven employees nevertheless filed a collective action against the company, alleging violations of the Fair Labor Standards Act and the Texas Minimum Wage Act. In response, Cordua circulated a revised arbitration agreement to its workforce prohibiting employees from joining any collective action without the company's written consent. Although the Administrative Law Judge initially found that Cordua had violated the Act based on this conduct, the Supreme Court's subsequent Epic Systems decision required that the case be revisited.
In Epic Systems Corp. v. Lewis, 584 U.S. __ (2018), the Supreme Court held that individualized arbitration agreements containing class and collective action waivers were lawful under the National Labor Relations Act and should be fully enforced pursuant to the Federal Arbitration Act.
The Board's Decision
This case presented two issues of first impression in the wake of Epic Systems. First, can an employer issue a mandatory arbitration agreement in response to protected concerted activity? And second, can an employer threaten to discharge an employee who refuses to sign such a mandatory arbitration agreement? In a major win for employers on these contentious issues, the Board answered both questions in the affirmative.
Although the Board found that opting in to a collective wage and hour suit constitutes protected concerted activity, it explained that an employer's response, requiring the waiver of opt in rights for such actions, is lawful. As the Board explained, Epic Systems clarified that compelling employment law claims to be resolved through individual arbitration, as opposed to a class or collective suit, does not restrict employee rights under the Act. Therefore, the Board reasoned that, as long as the revised arbitration agreement at issue did not restrict employee rights under the Act in some distinguishable way, no violation should be found. After all, adherence to the revised arbitration agreement would not prevent any employee from vindicating any rights via arbitration, and nothing in the agreement language implied that employees would be disciplined for any failure to abide by its terms.
With regard to the second issue – whether an employer can threaten to discharge an employee who refuses to sign a revised arbitration agreement – the record showed that Cordua's Assistant Manager explicitly warned employees apprehensive of the new agreement that it would be a bad idea "to bite the hand that feeds" them and that he would instead "go ahead and sign" the revised agreement. The Board reasoned that, because Epic Systems affords employers the right to condition employment on acceptance of a class or collective action waiver, these statements – although threatening – were an accurate description of the lawful consequences of failing to sign the revised agreement. While employees are permitted to raise concerns with regard to what they are being asked to sign, they could nonetheless be disciplined for refusing to waive their collective action opt in rights.
Although the decision represents a positive outcome for employers, it was not a complete victory. While the conduct described above was not found to violate the Act, the Board did find that Respondent unlawfully discharged one employee for having joined the collective action. The Board explained that:
"while Epic Systems entitled the Respondent to promulgate and maintain individual arbitration agreements, including promulgating such agreements in response to opt-in activity, and to enforce those agreements in court by seeking individual arbitration of the employees' wage-and-hour claims pursuant to those agreements, it did not similarly entitle the Respondent to discharge [an employee] for joining with his coworkers in filing a collective action to pursue those claims."
This decision provides yet another much needed clarification on the impact of last year's Supreme Court's decision in Epic Systems. The current Board appears committed to an aggressive interpretation of that decision: that employers should be permitted to condition employment on an employee's waiver of the right to file or join class and collective actions against an employer, even after such litigation has begun.
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