NLRB CONTINUES TO INVALIDATE CLASS ACTION WAIVERS DESPITE ALMOST GUARANTEED REVERSAL IN FEDERAL AND STATE COURTS

Paula Lopez, May 13, 2016.

Earlier this month, a split three-member NLRB panel affirmed the December 24, 2015 administrative law judge’s decision invalidating a class and collective action waiver contained in CVS’s workplace arbitration policy. The administrative decision was one of a flurry of decisions issued by the NLRB at the end of 2015 addressing this issue and continuing to apply the Board’s decisions in D.R. Horton and Murphy Oil U.S.A., Inc. to invalidate class action waivers.  D.R. Horton and Murphy Oil U.S.A. hold that implementing and maintaining an arbitration program containing class and collective action waivers violates Section 8 (a) (1) of the National Labor Relations Act (“NLRA”).  Section 8 (a) (1) states that it is an unfair labor practice for an employer to “interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in Section 7.”  NLRA Section 7 affords employees the right to engage in “other concerted activities for the purpose of collective bargaining or other mutual aid or protection…”

The NLRB, in invalidating class and collective action waivers, takes the position that such provisions impede on employees’ rights to act collectively in enforcing their rights in the workplace or, in other words, to engage in concerted activity as is their right under the NLRA.  However, the Fifth Circuit Court of Appeals, as well as other circuit courts, have repeatedly rejected this position, relying on Supreme Court precedent upholding class and collective class action waiver.  The Fifth Circuit overturned D.R. Horton and Murphy Oil U.S.A., and held that the NLRB failed to give proper deference to the Federal Arbitration Act, noting that the right to proceed through class or collective actions are procedural, not substantive rights, and there is no congressional mandate preventing individual arbitrations of non-NLRA claims.

The NLRB’s decision on CVS’ class action waiver reinforces its intent to remain steadfast in its position that such waivers impede on employees’ Section 7 rights despite repudiation by state and federal courts addressing the issue. In invalidating CVS’s class and collective action waivers, the NLRB was unswayed by the fact that employees had 30 days to opt-out of the policy without any effect on their continued employment with the company. The Board considered that an unfair labor practice occurred by the mere fact that CVS implemented and maintained the policy containing a class action waiver.

One may wonder why the NLRB continues to render decisions invalidating class and collective action waivers included in arbitration provisions, despite the likelihood that the decision will be overturned on appeal. This is because an NLRB administrative law judge is bound by Board precedent until it is reversed by the Supreme Court.  Given this, it is no surprise that the NLRB has not taken any steps to have this issue heard by the Supreme Court.  If and until the Supreme Court rules on this issue, employers who find themselves and their mandatory arbitration provisions scrutinized by the NLRB and the subject of an adverse decision can seek appellate review of the decision. Employers have three appellate court options when seeking review of a decision issued by the NLRB: (1) the circuit where the unfair labor practice allegedly took place; (2) any circuit in which the employer transacts business; or (3) the D.C. Circuit.  As expected, many national companies favor the Fifth Circuit in seeking appellate review given its prior rulings, although employers are likely to get the same result in any of the other circuit courts. CVS has stated that it intends to appeal the NLRB’s decision.