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28 August 2019
On 14 August 2019 the National Labour Relations Board (NLRB) issued a decision in Cordúa Restaurants, Inc that expands the Supreme Court's decision in Epic Systems Corp v Lewis and further authorises employers to limit employees' ability to file or opt in to a class or collective action against their employer.
In Epic Systems, the Supreme Court held that the Federal Arbitration Act requires enforcement of arbitration provisions in employment contracts mandating one-on-one arbitration, and that enforcement of arbitration agreements does not conflict with the right to engage in concerted activity under Section 7 of the National Labour Relations Act (NLRA). Thus, under Epic Systems, employers can use arbitration agreements to foreclose employees' ability to participate in class and collective actions.(1)
In the recent case of Cordúa Restaurants, the NLRB considered two issues of first impression in the wake of Epic Systems:
In Cordúa Restaurants, the employer's arbitration agreement required employees to waive their "right to file, participate or proceed in class or collective actions (including a Fair Labor Standards Act ('FLSA') collective action) in any civil court or arbitration proceeding". However, several employees filed a collective action alleging violations of the FLSA. Approximately nine months after the action was filed, and after several employees opted in to the action, the employer distributed a revised arbitration agreement, which included additional language that an employee "cannot file or opt-in to a collective action under this Agreement". A manager instructed the employees that they would be removed from the schedule if they refused to sign the revised agreement. The manager further advised the employees that he "wouldn't bite the hand that feeds me" and that he would "go ahead and sign it".
The NLRB held that employers can promulgate an arbitration agreement requiring individual arbitration and precluding an employee from opting in to a class or collective action in response to employees filing and opting in to such an action. The NLRB reasoned that:
because opting in to a collective action is merely a procedural step required in order to participate as a plaintiff in a collective action, it follows that an arbitration agreement that prohibits employees from opting in to a collective action does not restrict the exercise of Section 7 rights, and accordingly, does not violate the [NLRA].(2)
Second, the NLRB held that employers can inform employees that their refusal to enter into a mandatory arbitration agreement will result in their discharge. The board found that the employer's statements in Cordúa Restaurants were not unlawful threats of reprisal, but instead "amounted to an explanation of the lawful consequences of failing to sign the agreement and an expression of the view that it would be preferable not to be removed from the schedule". The board based its conclusion on the fact that Epic Systems allows employers to condition employment on employees signing a mandatory arbitration provision that requires the waiver of class and collective actions.
That said, although the NLRB held that employers can inform employees that failing to sign a mandatory arbitration agreement will result in their discharge, employers are nonetheless prohibited from discharge or taking adverse action against an employee who engages in a class or collective action.
In light of the NLRB's decision in Cordúa Restaurants, employers may not only require employees to enter an arbitration agreement that requires one-on-one arbitration, but also impose such an agreement after, and in response to, employees filing or opting in to a class or collective action.
Additionally, employers may inform employees that their refusal to sign the arbitration agreement will result in their discharge. However, employers may not discharge an employee for filing or opting in to a class or collective action.
For further information on this topic please contact Richard I Scharlat at Dentons' New York office by telephone (+1 212 768 6700) or email (firstname.lastname@example.org). Alternatively, contact Sarah Hannah Phillips at Dentons' Atlanta office by telephone (+1 404 527 8124) or email (email@example.com). The Dentons website can be accessed at www.dentons.com.
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Richard I Scharlat