COMMENTARY: That arbitration agreement might need some revisions

By Rich Meneghello
BridgeTower Media Newswires
 
Many employers have incorporated arbitration agreements into their standard human resources process, and gained much value from them. They bring efficiency, cost savings, confidentiality and a certain sense of predictability when it comes to the resolution of workplace disputes.

The good news for employers is that the federal court system and workplace law agencies have generally been pro-arbitration, rejecting most challenges from employees attempting to invalidate such agreements. But a surprising decision last month from the National Labor Relations Board calls the validity of many such agreements into question, and will require all employers to review their arbitration pacts to ensure they meet a new standard.

On June 18, the National Labor Relations Board issued a unanimous decision invalidating an employer’s mandatory arbitration agreement because it could be reasonably interpreted as preventing employees from filing charges with the NRLB. The Prime Healthcare decision analyzed the employer’s arbitration agreement using the relatively new Boeing Co. standard for evaluating “facially neutral” policies and rules that potentially interfere with employees’ protected rights, but fell on the side of the workers. This decision may require employers to adjust their arbitration agreements to ensure they stay on the right side of the law.

Prime Healthcare agreement

Prime Healthcare required employees to sign an arbitration agreement that did not explicitly prohibit them from filing charges with the NLRB. Rather, the agreement included broad language that said “all claims or controversies for which a federal or state court would be authorized to grant relief” are subject to arbitration, including examples such as those related to wages, breach of contract, discrimination, and violations of any “federal, state or other governmental constitution, statute, ordinance, regulation or public policy.”

The agreement did not specifically identify claims under the National Labor Relations Act (NLRA) as being covered, but it also did not explicitly exclude them. The agreement, however, did exclude from arbitration some claims, such as workers’ compensation and unemployment claims.

The applicable standard

The NLRB first explained that nothing in the U.S. Supreme Court’s recent Epic Systems decision – including approval of class and collective action waivers in mandatory arbitration agreements – disturbed the long-standing precedent that the NLRA provides workers with the right to file charges with the NLRB, nor does the Federal Arbitration Act authorize agreements limiting that right.

The NLRB then explained that an arbitration agreement explicitly prohibiting the filing of charges with the NLRB or, more generally, with administrative agencies, must be found unlawful because such an agreement would constitute an explicit prohibition of the exercise of employee rights under the NLRA.

Acknowledging that Prime Healthcare’s arbitration agreement did not explicitly prohibit the filing of charges with the NLRB, the Board analyzed whether the agreement was nevertheless unlawful under the Boeing Co. balancing test. In Boeing Co., the NLRB held that when a facially neutral policy or rule, when reasonably interpreted, potentially interferes with employees’ rights under the NLRA, the Board must balance the nature and extent of the potential impact with legitimate justifications associated with the policy or rule.

Applying Boeing Co., the NLRB concluded that the arbitration agreement at issue, when reasonably interpreted, potentially interfered with employees’ rights because it effectively covered all claims (with limited exceptions) and did not expressly exclude NLRA claims. The Board then determined that the potential impact on employee rights was significant, opining that the right to file charges with the NLRB was “indispensable to the effectuation of national labor policy.”

Prime Healthcare offered no legitimate justifications for the breadth of its arbitration agreement, nor could it have, according to the NLRB. The Board explained, “As a matter of law, there is not and cannot be any legitimate justification for provisions, in an arbitration agreement or otherwise, that restrict employees’ access to the Board or its processes.”

Accordingly, the Board held that Prime Healthcare’s arbitration agreement was unlawful to the extent it prohibited employees from filing charges with the NLRB. The Board ordered Prime Healthcare to rescind the agreement (which it had already done, replacing it with an agreement that specifically carved out NLRB charges from mandatory arbitration) and notify current and former employees who signed the agreement that it was no longer in effect.

Significance for employers

In light of last month’s decision, employers should promptly review any arbitration agreements they maintain to determine whether they include broad language that might be read as precluding employees from filing charges with the NLRB. The decision also intimated that general disclaimer language, such as “nothing in this agreement is intended to interfere with employees’ rights or violate the law” may not be sufficient to save it. Consequently, any employer that believes its arbitration agreements are safe because of a general disclaimer should take a second look.
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Rich Meneghello is a partner in the Portland office of Fisher Phillips, a national firm dedicated to representing employers’ interests in all aspects of workplace law. Contact him at 503-205-8044 or rmeneghello@fisherphillips.com, or follow him on Twitter – @pdxLaborLawyer.