In Ross Stores, Inc. and Rachel Goss (Case 31-CA-109296 (October 2014)), Administrative Law Judge ("ALJ") Jay R. Pollack found that clothing retail chain Ross Stores violated the National Labor Relations Act ("NLRA") when it required employees to sign an agreement that barred them from pursuing collective actions. Pollack said that the agreement violated Section 7 of the NLRA, which protects employees' rights to engage in concerted activity when acting in a manner intended to improve their working conditions. In making his decision, ALJ Pollack followed the precedent of the National Labor Relations Board ("NLRB") in D.R. Horton, 357 NLRB No. 184 (2012), which holds that arbitration agreements cannot prevent employees from engaging in concerted activity.1
Specifically, ALJ Pollack found that there were two agreements which Ross Stores required its employees to sign that violated the NLRA. The first was an arbitration policy in the company's handbook and the second was a "dispute resolution pact" which employees electronically signed to agree to have problems related to their employment resolved by mediation or binding arbitration. The goal of these agreements was to avoid class or collective action by employees, either in court or arbitration. ALJ Pollack decided that both agreements "restrict[s] employees' Section 7 right to engage in concerted action for mutual aid or protection."2
The practice of employers requiring their employees to sign arbitration agreements that contain class action waivers has become a much-debated topic with the NLRB and courts. In D.R. Horton, Inc. v. NLRB, 737 F. 3d 344 (5th Cir. 2013), the Fifth Circuit overruled the NLRB's D.R. Horton decision, finding that the Federal Arbitration Act ("FAA") requires enforcement of arbitration agreements unless (1) the agreement is void, for reasons which would void any other contract, or (2) where Congress has issued a "contrary command" that makes the arbitration agreement null and void.3 The Fifth Circuit held that the D.R. Horton's arbitration agreement policy did not fall under either exception because the Board's interpretation of the NLRA has the effect of disfavoring arbitration and there is no specific language indicating Congressional intent to have the NLRA's language override the FAA's stipulations.4
Despite the Fifth Circuit's decision, the NLRB continues to stand by its ruling in D.R. Horton, continuing to hold that employers cannot enforce employees to waive their right to collective action. The NLRB will continue to enforce its ruling at the ALJ and Board level until such time as the Supreme Court overrules its decision.5 The Supreme Court has not yet reached the issue of how class action waivers affect workers' rights to concerted activity. However, in American Express Co. v. Italian Colors, 133 S.Ct. 2304 (2013), the Court held that a clause in an arbitration agreement cannot be invalidated unless it is overridden by another statute.6
In addition to all of the debate surrounding the class action waiver issue, NLRB v. Noel Canning, 134 S. Ct. 2550, decided by the Supreme Court in August, may have a major effect on determining the enforceability of NLRB decisions from the past several years because of the timing of President Obama's recent appointees to the NLRB.7 The Board may have to revisit the issue of class action waiver clauses altogether in the near future.
While there is a lot to sift through, the issue of class action waivers in arbitration agreements will be a hot topic moving forward. Employees should be cognizant of the type of arbitration agreements they are signing and be aware of their rights, as well as any rights they might be signing away.
The legal team at SFMS has significant experience litigating employment matters. If you have any questions regarding this subject or this posting, please contact James E. Miller (firstname.lastname@example.org) or Michael Ols (email@example.com). We can also be reached toll-free at (866) 540-5505.
Shepherd Finkelman Miller & Shah, LLP is a law firm with offices in California, Connecticut, Florida, New Jersey, New York, Pennsylvania and Wisconsin. SFMS also maintains an affiliate office in London, England and is an active member of Integrated Advisory Group (www.iaginternational.org), which provides us with the ability to provide our clients with access to excellent legal and accounting resources throughout the globe. For more information about our firm, please visit us at www.sfmslaw.com.
2. www.nlrb.gov/cases-decisions/administrative-law-judge-decisions (Case Number 31-CA-109296)