arbitration agreements

The National Labor Relations Board (the Board) issued a 3–1 decision in Cordúa Restaurants, Inc., 368 NLRB No. 43 (2019), on Wednesday that provides significant new guidance regarding the intersection of arbitration agreements and the National Labor Relations Act (NLRA). The Board’s decision expressly authorizes employers to implement arbitration agreements that include collective waivers in direct response to employees filing a Fair Labor Standards Act (FLSA) collective action. Further, the Board held that warning employees that they will be discharged if they do not accept such an agreement — even with FLSA litigation pending — does not constitute a violation of the NLRA.

In January 2015, seven employees filed an FLSA collective action against Cordúa Restaurants, Inc., a Houston-based restaurant group, in the United States District Court for the Southern District of Texas. Subsequently, 13 additional employees opted into the lawsuit. In response to the lawsuit, Cordúa implemented a revised mandatory arbitration agreement that was to be executed by all employees. The new agreement expressly required employees to waive FLSA collective rights and arbitrate FLSA claims on an individual basis. Though Cordúa had previously required employees to execute an arbitration agreement that waived class action rights, the new agreement marked the first time that employees were asked to waive collective rights. When the new agreement was presented to employees, managers informed employees that they would not be scheduled for any additional shifts unless and until they executed the new arbitration agreement. The charging parties asserted that both implementing the arbitration agreement because of the litigation and threatening to constructively terminate those who refused to sign the agreement constituted violations of the NLRA.Continue Reading NLRB offers new guidance on mandatory arbitration agreements following last year’s Epic decision

In 2010, the United States Supreme Court struck a blow to class action plaintiffs subject to Federal Arbitration Act (FAA)-covered arbitration agreements when it concluded that a court may not compel class arbitration when the agreement is silent regarding the availability of such proceedings. Stolt-Nielsen SA v. AnimalFeeds Int’l, 559 U.S. 662 (2010). “[A] party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so.” Id. at 684.

On April 24, 2019, the Court went one step further, holding that “[l]ike silence, ambiguity does not provide a sufficient basis to conclude that parties to an arbitration agreement” consented to class arbitration. Lamps Plus, Inc. v. Varela, Case No. 17-988 (Apr. 24, 2019) (Lamps Plus). The Court reversed the Ninth Circuit decision, which found that contractual ambiguity coupled with state contract law requiring courts to construe ambiguities against the drafter created a contractual basis for class arbitration. See Varela v. Lamps Plus, Inc., 701 Fed. Appx. 670, 673 (9th Cir. 2017). The Court held that the FAA preempted the state contract law doctrine as applied by the Ninth Circuit because it “manufactured [class arbitration] by state law rather than consen[t].” When an arbitration agreement is ambiguous regarding class proceedings, the Court will “not seek to resolve the ambiguity by asking who drafted the agreement.” Rather, the FAA provides the default rule that class arbitration is not available when the contract is ambiguous.Continue Reading Class arbitration requires contractual clarity

In a recent decision issued on March 21, 2019, an administrative law judge (ALJ) held that confidentiality clauses in arbitration agreements violate the National Labor Relations Act (the Act). Specifically, the ALJ held that such provisions run afoul of section 8(a)(1) of the Act, and unlawfully require a waiver of employees’ rights under section 7 of the Act to discuss and publicly disclose their terms and conditions of employment. Many may view rulings like this as yet another attack on otherwise lawful arbitration agreements.

In the matter before the ALJ, an employer had lawfully required its employees to enter into an arbitration agreement as a condition of continued employment. The arbitration agreement included a confidentiality clause. The confidentiality clause provided, in part: “The parties shall maintain the confidential nature of the arbitration proceeding and the award, including all disclosures in discovery, submissions to the arbitrator, the hearing, and the contents of the arbitrator’s award[.]”

Although the confidentiality clause, as written, appeared to impose a duty of secrecy rather than a prohibition on disclosure, the ALJ instructed that employees would nonetheless reasonably understand the clause’s message to be one prohibiting them from discussing or disclosing information pertaining to the arbitration or arbitral award. Further still, the clause would reasonably cause employees to believe that they could be disciplined if they were to disclose the information.Continue Reading Tell everybody: Confidentiality clauses may violate employees’ section 7 rights

In a strong blow to employers, the Ninth Circuit Court of Appeals recently released its opinion in Stephen Morris, et al. v. Ernst & Young, et al., No. 13-16599, D.C. No. 5:12-cv-04964-RMW (August 22, 2016), holding that agreements precluding employees from bringing “concerted actions” such as class and/or collective actions relating to their wages,

Governor Brown got it right when he vetoed Assembly Bill 465, which would have restricted the enforcement of arbitration agreements requiring the arbitration of claims brought against employers for violations under the California Labor Code.  The proposed bill would have made it unlawful to use such provisions as a condition of employment.  The governor

The California legislature recently submitted a bill (AB 465) to Governor Jerry Brown that deters employers from using arbitration agreements that include a provision requiring the arbitration of claims brought against employers for violations under the California Labor Code.

AB 465 provides that any waiver of rights, penalties, remedies, forums and procedures established by the California Labor Code, including the right to file a claim with the Labor Commissioner or a civil action in court, may not be required as a condition of employment. The bill would also require that any waiver be knowing and voluntary, in writing, and expressly not made as a condition of employment. This added provision will no doubt provide another avenue for employees to challenge the waiver of Berman hearings (administrative hearings before a Deputy Labor Commissioner regarding claims of California Labor Code violations) in arbitration agreements.

Employers who seek to enforce such waivers will bear the burden of proof that they satisfied the requirements of AB 465. Employees often argue that arbitration agreements provided with offers of employment are implied conditions of such employment. Therefore, if the bill is signed into law, employers should include an express provision in their arbitration agreements that states that it is not required for employment. Otherwise, courts will likely deem signed waivers involuntary, unconscionable, against public policy and unenforceable.
Continue Reading California Legislature Pushes to Limit Employer/Employee Arbitration Agreements

2013 is shaping up to be the year that that party ended for state evasion of the Federal Arbitration Act. States have traditionally relied on a number of stratagems to avoid the preemptive force of the FAA’s “liberal federal policy favoring arbitration.” (Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 [1983]). One was to hide behind the FAA’s “savings clause,” which permits states to refuse to enforce arbitration agreements on “such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. The savings clause preserves generic contract defenses such as fraud, duress or unconscionability, and ensures that they are not preempted. States made liberal use of the savings clause to avoid the FAA’s enforcement mandate by deploying a veneer to generality to save rules aimed at limiting the enforcement of arbitration agreements.Continue Reading 9th Inning, Two Outs, None On for California State Courts That Ignore Federal Arbitration Act