Even further expanding the National Labor Relations Board’s (“NLRB”) holdings in D.R. Horton and Murphy Oil limiting employer requirements concerning class action waivers, on June 26, 2015, an NLRB administrative law judge (“ALJ”) ruled that even a non-mandatory arbitration agreement that is voluntarily entered into by employees is unlawful if it requires employees to waive joint, class or collective actions in all forums, judicial and arbitral.
In November 2011, AT&T Mobility Services (“AT&T”) sent via email a Management Arbitration Agreement (“Agreement”) to 24,000 of its employees who were not represented by unions that included a class and collective action waiver. The email made clear employees had the right to opt-out of the Agreement and provided employees instructions on how to do so electronically.
The email’s subject line read: “Action Required: Notice Regarding Arbitration Agreement.” Once the Agreement was electronically opened, the page linked to a button marked “Review Completed,” which when clicked, indicated that an employee had reviewed it. Employees who did not click on the button were sent additional emails until they reviewed and acknowledged the Agreement.
The emails provided each employee with a deadline of February 6, 2012 by which to choose to opt-out of the Agreement and explained that opting out meant the employee was declining “to participate in the arbitration process.” The messages also included assurances that no adverse action would be taken against employees who choose to opt out, provided employees with a hotline number to call should they have any questions and explicitly stated that all employees could still bring claims before administrative agencies.
In June 2013, three employees filed a wage and hour class action in federal district court. AT&T convinced the plaintiffs’ attorney that two of three employees had failed to opt-out of the Agreement and thus were bound to arbitrate their claims on an individual basis. AT&T argued that employees who had not opted out were bound by the Agreement and had waived their right to participate in the class action.
The class action continued in federal court, and the federal district court judge found that only those 175 employees who had opted-out of the Agreement were eligible to participate in the class (and only 20 actually opted to participate).
The two initial plaintiffs who had not opted out of the Agreement proceeded to arbitration with their claims and eventually sought new counsel. Their new attorney filed an unfair labor practice (“ULP”) charge with the NLRB on their behalf, arguing that the Agreement violated their rights under the National Labor Relations Act (“NLRA”) by interfering with their right to participate in a class action, a form of concerted activity. The Board’s Regional Director agreed, issued a Complaint, and the matter proceeded to a hearing before an ALJ.
While the NLRB ALJ conceded that the Agreement “initially was not mandatory” due to the opt-out option, she took issue with what she concluded was an absence of evidence that employees were actually appraised “in layman’s terms, of the ‘real-life’ consequences of the choice they were being asked to make.” On that basis, the ALJ reasoned that once an employee failed to opt-out, there was “no opportunity for an employee to reconsider his or her decision.”
The ALJ held that an employer may not require employees to enter into arbitration and class action waiver agreements—even where the employee voluntarily elects not to opt out—if the agreement includes an irrevocable waiver of the employee’s future rights protected by the NLRA, such as the right to participate in joint, class or collective actions.
As a remedy, the ALJ ordered AT&T to rescind the Agreement, or to revise it to make clear that employees are not required to waive their right to pursue joint, class or collective actions in all forums, arbitral or judicial.
While the ALJ had no problem stating that she was bound by NLRB precedent and the holdings of D.R. Horton and Murphy Oil, she failed to mention that Section 7 of the NLRA also affords employees the right to refrain from—and thus opt out of—collective action. Specifically, while the current Board, and the ALJ here, have conjured a prohibition on class action waivers out the clause of Section 7 which states that employees “shall have the right to…engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection...,” each has ignored Section 7’s equally important counterpart which provides that employees “shall also have the right to refrain from any or all such activities….”
Despite the fact that every U.S. Court of Appeals that has been asked to review D.R. Horton and Murphy Oil has outright rejected the NLRB’s extreme holdings concerning class and collective action waivers in arbitration agreements, the Board pushes forward undeterred and continues to adhere to, and ALJ’s continue to follow, the Board’s rationale and holdings articulated in those cases.
The unanimity and absence of any split among the Courts of Appeal makes it all the more likely that the U.S. Supreme Court will eventually address the NLRB’s very aggressive anti-arbitration agreement position. Considering that the NLRB’s view directly conflicts with the Supreme Court’s prior rulings regarding class action waivers in arbitration agreements, it will be interesting to see how the NLRB’s position holds up if and when it ultimately comes under Supreme Court scrutiny.
In the meantime, the area has become increasingly difficult for employers to navigate. Any employer that wishes to adopt an arbitration agreement with its individual employees that provides for some kind of joint, collective, or class action waiver should contact experienced labor counsel to determine the best course of action for the particular employer.