Do Class Action Waivers in Individual Arbitration Agreements Violate Labor Law?

By Ted Olsen

In recent issues of this newsletter, we have discussed the effort by some employers - while entering into agreements with their individual employees mandating the arbitration of any and all disputes - to avoid the arbitration of "class actions" or "class claims." In general, employers and businesses oppose class arbitration, and do not include class claims within the scope of arbitrable claims (or expressly exclude class claims from the scope of arbitrable claims). Some employers are hopeful that, by requiring all employees to sign mandatory arbitration agreements, and by including a class action waiver in the arbitration agreements, class claims (or at least class claims in arbitration) effectively will be eliminated.

Just before resigning as NLRB General Counsel (see, "New NLRB General Counsel Named," above), Ronald Meisburg, issued a "Guideline Memorandum Concerning Unfair Labor Practice Charges Involving Employee Waivers in the Context of Employers' Mandatory Arbitration Policies," NLRB Memorandum GC 10-06 (June 16, 2010), suggesting that employers may violate the Labor Management Relations Act when requiring employees to sign arbitration agreements prohibiting the arbitration of "class claims." Although this Guideline Memorandum is not at all conclusive on the matter, especially when it represents the policy views of a former General Counsel, it raises points to be considered when attempting to prevent class arbitrations.

The basic premise of the Guideline Memorandum is that, when employees band together for the purpose of mutual aid and protection, including the filing of lawsuits to improve working conditions, they are engaged in so-called Section 7 concerted protected activity under the Labor Management Relations Act. Prohibiting employees from engaging in such activity is unlawful.

Based on this premise, General Counsel Meisburg reached the following conclusions:

The concerted filing of a class action lawsuit or arbitral claim by employees is protected activity, and if an employer threatens, disciplines, or discharges an employee for such concerted activity, the employer violates Section 8(a)(1) of the Act. It is unlawful, therefore, for an employer to have a mandatory arbitration agreement that could reasonably be read by an employee as barring the employee from joining with other employees to file a class action claim (in court or arbitration).

An employer may lawfully require individual employees to sign mandatory arbitration agreements, including those agreements that deny class arbitration.

Arbitration agreements should be worded clearly, so as not to suggest to employees that they do not have the right to act concertedly with other employees to challenge the enforceability of the agreements, and to act concertedly with other employees to bring class claims in arbitration. Such a suggestion would violate Section 8(a)(1) of the Act. A mandatory arbitration agreement that could reasonably be read by an employee as prohibiting him or her from joining with other employees to assert class claims in arbitration, would be an unfair labor practice.

If an employee who had signed such a mandatory arbitration agreement filed a class action lawsuit in court, the employer could not threaten or discipline the employee for having done so. The employer, however, may lawfully seek to have such a class action complaint dismissed by the court on the ground that each of the purported class members are separately bound by their respective signings of a mandatory arbitration agreement.

Sherman & Howard has prepared this advisory to provide general information on recent legal developments that may be of interest. This advisory does not provide legal advice for any specific situation. This does not create an attorney-client relationship between any reader and the Firm. If you want legal advice on a specific situation, you must speak with one of our lawyers and reach an express agreement for legal representation.

	Contact Us Services Attorneys News and Events Publications About the Firm Inclusiveness Careers In the Media Events and Registration Press Releases Speaking Engagements Articles Client Advisories Subscriptions History Offices Pro Bono Interlaw Contact Us Culture Legal Opportunities Summer Associates Support Staff Publications Client Advisories Home > Publications > Client Advisories > View Do Class Action Waivers in Individual Arbitration Agreements Violate Labor Law? By Ted Olsen In recent issues of this newsletter, we have discussed the effort by some employers - while entering into agreements with their individual employees mandating the arbitration of any and all disputes - to avoid the arbitration of "class actions" or "class claims." In general, employers and businesses oppose class arbitration, and do not include class claims within the scope of arbitrable claims (or expressly exclude class claims from the scope of arbitrable claims). Some employers are hopeful that, by requiring all employees to sign mandatory arbitration agreements, and by including a class action waiver in the arbitration agreements, class claims (or at least class claims in arbitration) effectively will be eliminated. Just before resigning as NLRB General Counsel (see, "New NLRB General Counsel Named," above), Ronald Meisburg, issued a "Guideline Memorandum Concerning Unfair Labor Practice Charges Involving Employee Waivers in the Context of Employers' Mandatory Arbitration Policies," NLRB Memorandum GC 10-06 (June 16, 2010), suggesting that employers may violate the Labor Management Relations Act when requiring employees to sign arbitration agreements prohibiting the arbitration of "class claims." Although this Guideline Memorandum is not at all conclusive on the matter, especially when it represents the policy views of a former General Counsel, it raises points to be considered when attempting to prevent class arbitrations. The basic premise of the Guideline Memorandum is that, when employees band together for the purpose of mutual aid and protection, including the filing of lawsuits to improve working conditions, they are engaged in so-called Section 7 concerted protected activity under the Labor Management Relations Act. Prohibiting employees from engaging in such activity is unlawful. Based on this premise, General Counsel Meisburg reached the following conclusions: The concerted filing of a class action lawsuit or arbitral claim by employees is protected activity, and if an employer threatens, disciplines, or discharges an employee for such concerted activity, the employer violates Section 8(a)(1) of the Act. It is unlawful, therefore, for an employer to have a mandatory arbitration agreement that could reasonably be read by an employee as barring the employee from joining with other employees to file a class action claim (in court or arbitration). An employer may lawfully require individual employees to sign mandatory arbitration agreements, including those agreements that deny class arbitration. Arbitration agreements should be worded clearly, so as not to suggest to employees that they do not have the right to act concertedly with other employees to challenge the enforceability of the agreements, and to act concertedly with other employees to bring class claims in arbitration. Such a suggestion would violate Section 8(a)(1) of the Act. A mandatory arbitration agreement that could reasonably be read by an employee as prohibiting him or her from joining with other employees to assert class claims in arbitration, would be an unfair labor practice. If an employee who had signed such a mandatory arbitration agreement filed a class action lawsuit in court, the employer could not threaten or discipline the employee for having done so. The employer, however, may lawfully seek to have such a class action complaint dismissed by the court on the ground that each of the purported class members are separately bound by their respective signings of a mandatory arbitration agreement. Sherman & Howard has prepared this advisory to provide general information on recent legal developments that may be of interest. This advisory does not provide legal advice for any specific situation. This does not create an attorney-client relationship between any reader and the Firm. If you want legal advice on a specific situation, you must speak with one of our lawyers and reach an express agreement for legal representation. ©2010 Sherman & Howard L.L.C. July 7, 2010 Copyright 2000-2010 Sherman & Howard L.L.C. All rights reserved. Privacy Policy \| Terms of Use