On August 14, 2018, the National Labor Relations Board issued its first decision regarding mandatory arbitration agreements following the U.S. Supreme Court’s decision in Epic Systems Corp. In doing so, the Board gave further guidance about when employers can promulgate mandatory arbitration agreements and whether employers can inform employees of the possible consequences for their refusal to sign such agreements.
In Epic Systems Corp. v. Lewis, the U.S. Supreme Court held that agreements containing class and collective action waivers and requiring that employment-related disputes be resolved by individual arbitration do not violate the National Labor Relations Act. Consistent with this ruling, the Board, in Cordua Restaurants, Inc., made clear that under the Act, employers are not prohibited from instituting mandatory arbitration agreements in response to employees opting into a wage and hour collective action. According to the Board, “[b]ecause 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 Act.” The key here is that the agreement does not restrict Section 7 rights. Therefore, even if the agreement is put in to place in response to protected activity it is not a violation of the Act.
The Board also held that employers are not prohibited under the Act from informing employees that failing to sign a mandatory arbitration agreement will result in disciplinary action, including discharge. “Because Epic Systems permits an employer to condition employment on entering into an arbitration agreement that contains a class or collective action waiver, we find . . . that [the supervisor] did not unlawfully threated employees with reprisals,” when he explained to employees while distributing the arbitration agreement that they would be removed from the schedule if they refused to sign and that he “wouldn’t bite the hand that feeds me.”
Despite finding that the foregoing actions did not violate the Act, the Board did hold that the discharge of an employee who discusses wage issues and ultimately files a FLSA collective action (despite the existence of a mandatory arbitration agreement) does violate the Act. The Board held that such actions are protected activity and that while Epic Systems allows employers to require employees to sign individual arbitration agreements and enforce those agreements in court, it does not entitle employers to discharge employees for filing such claims.
While this decision gives further guidance to those employers that use mandatory arbitration agreements as it relates to the National Labor Relations Act, it also reminds employers that they cannot take adverse action against an employee that does not adhere to the agreement if the employee’s actions can be construed as protected activity under the Act, such as filing a class or collective wage and hour action.