David’s Analysis of Quirky Question # 186: Can Arbitration Agreements Ban Class Claims?
[Readers: My colleague, David Trevor, has provided the analysis to Quirky Question # 186, which addresses a recent decision of the NLRB regarding the ban of class or representative actions in an arbitration agreement. For more information about this issue, do not hesitate to contact David at 612.340.8718, or at trevor.david@dorsey.com. Additional data regarding David is available at: http://www.dorsey.com/trevor_david/.
I hope you find this information to be helpful. Regards, Roy]
Quirky Question # 186:
For many years, our company has required all employees to sign a contract agreeing to arbitrate any employment claims, including discrimination claims. Last year we changed our form contract to make it clear that any arbitration only would cover the individual employee making the claim. There would be no “class action” arbitrations or anything like that. (We were told by another law firm that the Supreme Court had just ruled that this approach was legal.)
Now, we’ve got a terminated employee threatening to bring a class action against us. His lawyer says our new arbitration contract violates the National Labor Relations Act and something called the Norris-Laguardia Act. But, we aren’t even a union shop! What’s going on here? I thought the Supreme Court just said that we could ban class actions in our arbitration agreements.
David’s Analysis:
Unfortunately, your ex-employee’s lawyer may have a point. A very recent decision of the National Labor Relations Board (NLRB), D.R. Horton, Inc. and Michael Cuda, Case 12-CA-25764, held that it was a violation of the National Labor Relations Act to require employees to sign an arbitration agreement preventing them from filing class, joint or collective claims. While that decision has not yet been reviewed by the courts, the NLRB’s analysis of the legal issues was thorough and addressed the relevant statutes and cases in some detail. In particular, the NLRB considered the recent Supreme Court case you reference (AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011)), but found that it did not apply in this context.
The NLRB’s ruling in the D.R. Horton matter was based on a provision in the National Labor Relations Act that not only protects classic union activity, such as organizing and collective bargaining, but also guarantees employees the right “to engage in … concerted activities for the purpose of … other mutual aid or protection …” 29 U.S.C. § 157. In other words, employees have the right to work together (or “collectively”) even outside of the traditional union context, for their “mutual aid or protection.”
The NLRB determined that collective litigation, such as class actions, constitutes the type of collective activity protected by the National Labor Relations Act. Therefore, the NLRB determined that the right to pursue employment claims collectively was protected activity. According to the NLRB, forcing employees, as a condition of employment, to sign a contract waiving that right was a violation of the Norris-LaGuardia Act, 29 U.S.C. § 101 et seq., which prohibits contracts that force employees to surrender certain protected rights. The NLRB distinguished this from cases allowing such contracts where the employee had the choice to sign (and receive additional benefits) or not sign but still remain employed.
The NLRB also analyzed the 2011 Supreme Court opinion in Concepcion, which upheld the validity of consumer contracts waiving rights to collective action. Concepcion involved cell phone customers claiming that certain fees had been fraudulently imposed. In that context, the NLRB ruled, class action rights were merely “procedural” and could be waived. In the employment context, by contrast, the right to act collectively for mutual aid and protection is “substantive,” and the employer cannot force employees to waive that right prospectively as a condition of employment. The NLRB also noted that if the National Labor Relations Act’s protection of collective action is in conflict with the Federal Arbitration Act’s (FAA) provision making arbitration agreements enforceable, the National Labor Relations Act, as the later statute, would control over the earlier FAA.
As noted above, this issue has not been litigated in court yet, so it may be that the NLRB’s ruling in D.R. Horton will be overruled, but it is a thorough and thoughtful opinion and represents the most recent statement on this issue.
As a practical matter, there are a number of issues your company should address going forward:
• Consider dropping the requirement that the waiver of class or collective action rights be a condition of employment. Instead, you could offer your employees additional consideration if they choose to sign a contract waiving those rights;
• If you can’t absolutely bar class or collective actions by employees, make a decision as to whether you would rather have any such actions brought in court or in arbitration. Note that some of the procedural protections in class action litigation are quite favorable to employers. You might decide that those offer better defensive prospects than the more informal rules which often prevail in arbitration;
• Once you have made the decision as to whether class litigation or class arbitration is the lesser of two evils, make sure any agreement you require employees to sign clearly specifies whether the employee is required to litigate or to arbitrate any class claims; and
• More broadly, don’t forget to consider the implications of the National Labor Relations Act and other labor statutes, even if you are not a unionized employer. As this situation illustrates, those laws can impact even non-union employers in some situations.
Doug’s Analysis of Quirky Question # 177, Regulating Speech in Union Organizing Campaigns
[Readers: Quirky Question # 177 was developed by my colleagues, Doug Christensen and Joel O'Malley. If you have any questions about their analysis, please don't hesitate to reach out to them. Doug's contact info is: 612.340.8875, or christensen.doug@dorsey.com. Joel's contact info is: 612.492.6727, or o'malley.joel@dorsey.com. Additional information regarding Doug and Joel is available at www.dorsey.com. Regards, Roy]
Quirky Question # 177:
I work for a company called Star Registered, Inc. We employ sales employees who perform door-to-door direct sales. Customers can register stars to their names (we copyright the name with the telescopic coordinates and provide a personalized certificate). We have learned that some of our employees would like to form a labor union, and are now wearing t-shirts during their field sales activities that read on the front “Registered Offender” and on the back “I offended Registered by trying to unionize.” We can prohibit these offensive t-shirts, right?
Doug’s and Joel’s Analysis:
As crazy as it sounds, probably not. Especially under the current leadership of the National Labor Relations Board (NLRB), employer prohibitions against the wearing of union insignia are scrutinized heavily, even for employers that are not currently union workplaces.
First, let me address the fact that your workforce is not currently represented by a union. Many employers are under the misconception that since their employees are not currently unionized, labor law (namely, the National Labor Relations Act (NLRA)) does not apply to them. The reality is that the NLRA applies to virtually all private sector employers and employees, whether or not they are unionized. Coverage under the NLRA, specifically Sections 7 and 8 of the Act, means those employees are protected against adverse action for engaging in concerted protected activities to improve their working conditions, again, whether or not a union is involved. In addition, employers are prohibited from discouraging such activity, or discriminating against employees on the basis of their engaging in concerted protected activity.
One activity that has long been recognized by the NLRB and by courts as protected is the practice of employees, during work, to don union insignia, whether it be buttons, pins, hats, t-shirts, etc. Employers typically want to know how they can lawfully limit this activity, especially when employees are otherwise obliged to wear company uniforms. Employers can set limits, but only if they establish “special circumstances” justifying the limitations. See Republic Aviation Corp. v. NLRB, 324 U.S. 793, 801-03 (1945). The Board has found special circumstances exist most often when union apparel has the potential to exacerbate employee dissension or unreasonably interfere with the employer’s public image. Read more
New Process Steel LP v. NLRB, Supreme Court Rules On NLRB Composition
By: Doug Christensen and Chris Amundsen
On June 17, 2010, a sharply divided United States Supreme Court resolved the case of New Process Steel LP v. NLRB. The highly anticipated decision resolved a Circuit split that had developed after the National Labor Relations Board, which normally has five members, spent 27 months issuing decisions as a two-member body. In a 5-4 decision, written by Justice Stevens and joined by Chief Justice Roberts and Justices Scalia, Thomas, and Alito, the Court held that while the National Labor Relations Act allows the five-member Board to delegate its powers to three members, and that two of those three members may constitute a quorum sufficient to exercise the Board’s powers, the Board has no authority to decide unfair labor practice and representation cases unless at least three of the Board’s five seats are filled. The decision presumably invalidated hundreds of decisions reached since January 1, 2008. Read more
Buttons Worn by Union Employees, Quirky Question # 44
I am a nursing supervisor working in a 250-bed acute care hospital. We have been engaged in protracted contract negotiations with the union representing our registered nurses for several months. Negotiations have bogged down over the nurses’ demand that their contract be amended to delete any provision for mandatory overtime to be assigned to nurses under any circumstances. For the past couple of weeks, a number of our nurses have come to work wearing buttons reading, “Refuse to Lose – No Forced Overtime.”
I am concerned that our patients or their family members will conclude from this that they may not be receiving an appropriate level of care. I have recommended to the Hospital Director that we publish a rule prohibiting nurses from wearing this button in any areas of the hospital where they may encounter patients or patient’s family members. However, our Human Resource Director has expressed reservations about this, suggesting that this might be unlawful. I can’t believe that we must permit this in a hospital setting. Who is right?
Bob’s Analysis:
As counterintuitive as this may seem, your Human Resource Director is appropriately concerned. In Washington State Nurses Ass’n v. NLRB, 526 F.3d 577 (9th Cir. 2008), the U.S. Court of Appeals for the 9th Circuit recently reversed a decision of the National Labor Relations Board (the Board) which had concluded that a hospital lawfully could prohibit nurses from wearing similar buttons. The Court of Appeals held instead that the hospital’s rule violated the rights of the nurses under the National Labor Relations Act (NLRA) because the hospital failed to establish that there were “special circumstances” permitting the hospital to ban such buttons under its rule.
The NLRA provides employees of covered employers certain rights, including the Section 7 right “to self-organization, to form, join or assist labor organizations . . . and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection . . . .” Section 8 of the NLRA provides that it is an unfair labor practice for an employer to “interfere with, restrain, or coerce employees in the exercise of the rights guaranteed . . . .” Over the years, the Board, the federal agency charged with administering the NLRA, has developed an intricate set of rules about union-related communications in the workplace, attempting to balance the statutory rights of employees under the NLRA with employers’ rights to maintain control of their premises and to operate their businesses.
The rules adopted by the Board and the courts over the years for application in hospital workplaces have traditionally distinguished between patient care areas within an acute care hospital and all other areas. In those non-patient care areas, attempts to ban the wearing or display of union insignia are presumptively invalid, but the presumption may be overcome by demonstrating that the ban is necessary to avoid disruption of health care operations or the disturbance of patients – i.e., “special circumstances.” Beth Israel Hospital v. NLRB, 437 U.S. 483 (1978). Traditionally, the employer proposing such a ban in areas outside direct patient care areas has the burden to prove that such special circumstances are present.
In the Washington State Nurses case, the hospital contended that buttons worn by nurses reading, “RNs Demand Safe Staffing” involved a clear suggestion that the hospital’s staffing levels were unsafe and that such a message was “inherently disturbing” to patients, thus establishing, without more, the requisite special circumstances. The record in the case contained no evidence of any actual disturbance of patients, nor of complaints by patients or members of their families, and no evidence that either patients or family members had even raised questions concerning the buttons. The hospital did offer proof that various nurse managers had expressed their own concerns about the potential effect of the union button on patients and their families.
In the Washington State Nurses case, an administrative law judge had issued a decision that the hospital’s action unlawfully interfered with employee rights under the NLRA and therefore violated Section 8. However, in reviewing the judge’s decision, the Board itself ruled 2-1 that the hospital’s ban of the “Safe Staffing” button was justified, finding that the message on the button at issue would “inherently disturb” hospital patients, thus satisfying the requirement of “special circumstances” to justify the enforcement of a ban outside of direct patient care areas.
The Board’s decision was appealed by the union to the U.S. Court of Appeals. In reviewing decisions of the Board, the Courts of Appeals are obliged by Sections 10(e) and (f) of the NLRA to affirm the Board’s findings of fact if they are “supported by substantial evidence on the record considered as a whole.” In reviewing the Board’s determination that the hospital had established “special circumstances” justifying its rule banning these buttons throughout the premises (even in non-patient care areas), the Court of Appeals concluded that there was no substantial evidence in the record to support the Board’s finding that these buttons had a disruptive effect on the hospital’s health care operations or its patients. Rather, the Court characterized the Board’s finding as inherently speculative, citing the absence of any record evidence of patient complaints, expressions of concern or even questions concerning the button. The Court also noted that this was true even though nurses had worn the very button at issue for several months before it was banned and had displayed a different – but arguably even more controversial – button prior to that for a number of months. Accordingly, after examining the record as a whole, the Court of Appeals concluded that the Board’s finding that the hospital had met its burden to establish “special circumstances” was not supported by substantial evidence, requiring its reversal.
In your question, there is no indication that the button worn by your nurses has prompted any expressions of concern or other indications of disturbance of patients or their family members to date. In the absence of any evidence that the button is actually having such an effect, it will be difficult to establish the special circumstances required to ban the wearing of such buttons throughout the hospital. Note that different considerations may apply in the event you wish to ban the wearing of these buttons only in direct patient care areas.
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