On August 14, 2019, the National Labor Relations Board issued a decision in the case of Cordúa Restaurants, Inc. et al. (Cordúa Restaurants) that expands the US Supreme Court's decision in Epic Systems Corp. v. Lewis and further authorizes employers to limit employees' ability to file or opt-in to a class or collective action against the employer.

The decision

In Epic Systems Corp. v. Lewis, the US Supreme Court held that the Federal Arbitration Act (FAA) requires enforcement of arbitration provisions in employment contracts mandating one-on-one arbitration, and that enforcement of arbitration agreements does not conflict with the right to engage in concerted activity under Section 7 of the National Labor Relations Act (NLRA). Thus, under Epic Systems, employers are permitted to utilize arbitration agreements to foreclose the ability of employees to participate in class and collective actions. For more information about the Epic Systems decision and its impact, click here and here.

In the recent case of Cordúa Restaurants, the NLRB considered two issues of first impression in the wake of the Epic Systems decision: (1) whether NLRA precludes employers from promulgating agreements containing class and collective action waivers and requiring one-on-one arbitration after employees opt-in to a collective action; and (2) whether the NLRA precludes employers from threatening to discharge an employee who refuses to sign a mandatory arbitration agreement.

In Cordúa Restaurants, the employer's arbitration agreement required employees to waive their "right to file, participate or proceed in class or collective actions (including a Fair Labor Standards Act ('FLSA') collective action) in any civil court or arbitration proceeding." However, several employees file a collective action alleging violations of the FLSA. Approximately nine months after the action was filed, and after several employees opted in to the action, the employer distributed a revised arbitration agreement, which included additional language that an employee "...cannot file or opt-in to a collective action under this Agreement..." A manager instructed the employees that they would be removed from the schedule if they refused to sign the revised agreement. The manager further advised the employees that he "wouldn't bite the hand that feeds me" and that he would "go ahead and sign it."

The NLRB held that employers are permitted to promulgate an arbitration agreement requiring individual arbitration and precluding an employee from opting in to a class or collective action in response to employees filing and opting in to such an action. The NLRB reasoned that "because opting in to a collective action is merely a procedural step required in order to participate as a plaintiff in a collective action, it follows that an arbitration agreement that prohibits employees from opting in to a collective action does not restrict the exercise of Section 7 rights, and accordingly, does not violate the [NLRA]." Cordúa Restaurants, 368 NLRB No. 43, at *2 (Aug. 14, 2019).

Second, the NLRB held that employers may inform employees that their refusal to enter a mandatory arbitration agreement will result in their discharge. The Board found that the employer's statements in the Cordúa Restaurants case were not unlawful threats of reprisal, but instead, "amounted to an explanation of the lawful consequences of failing to sign the agreement and an expression of the view that it would be preferable not to be removed from the schedule." The Board based its conclusion on the fact that Epic Systems allows an employer to condition employment on employees signing a mandatory arbitration provision that requires waiver of class and collective actions.

To be sure, although the NLRB held that it was permissible for employers to inform employees that failing to sign a mandatory arbitration agreement will result in their firing, employers are nonetheless still prohibited from firing or taking adverse action against an employee who engages in a class or collective action.

Practical impact

In light of the NLRB's decision in Cordúa Restaurants, employers may not only require employees to enter an arbitration agreement that requires one-on-one arbitration, but employers may also impose such an agreement after, and in response to, employees filing or opting in to a class or collective action.

Additionally, employers may inform employees that their refusal to sign the arbitration agreement will result in their discharge. However, employers may not discharge an employee for filing or opting in to a class or collective action.

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