Today's Workplace: A Labor and Employment Law Blog

NLRB Attacks Mandatory Employment Arbitration (Again!)

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The NLRB General Counsel has issued an unfair labor practice complaint against 24 Hour Fitness, an employer in California. The NLRB is alleging that, as a result of its mandatory arbitration policy dealing with employment disputes, 24-Hour Fitness has violated the National Labor Relations Act. The policy in question required employees, when hired, to waive their right to participate in class actions against 24 Hour Fitness. However, the employees were allowed 30 days to opt out from this restriction by submitting a specific form to the company.

The General Counsel has taken the position that this opt-out procedure is unlawful because it forces the employees to take exception to the mandatory arbitration policy on class actions very shortly after they are hired. In other words, in the view of the NLRB, the employer's policy constitutes unlawful coercion because the newly hired workers are going to be reluctant to identify themselves as potential “troublemakers” in the event they want to preserve their rights to file or join in a class action lawsuit or arbitration against 24 Hour Fitness.

In a previous case, D.R. Horton, Inc., which was decided earlier this year, the NLRB held that it was unlawful for the employer in a mandatory arbitration agreement to impose a class action waiver upon its employees. The Board said this restriction violated the workers’ Section 7 rights to engage in protected concerted activities. That case is on appeal to the federal circuit court of appeals. However, it seemed to have left the door open for the type of opt-out procedure crafted by 24 Hour Fitness.

Bottom Line for Employers

While the case involving 24 Hour Fitness must still be decided by an administrative law judge,  the NLRB is communicating its strong opposition to employer mandatory arbitration agreements. This position is not shared by the courts, as reflected in particular by the U.S. Supreme Court’s decision in AT&T Mobility LLC v. Concepcion (2011), which upheld class action waivers in consumer arbitration agreements.

These issues involving mandatory arbitration policies in the employment setting will remain in a state of uncertainty until these cases can be resolved by the courts.