“2, 4, 6, 8, we don’t want to litigate. 1, 2, 3, 4, that’s what arbitration’s for!”
If you’ve been following the NLRB the last few years, you probably know that this agency does not like mandatory arbitration agreements containing class action waivers. Not at all. According to the current labor board, such waivers interfere with (unionized and nonunionized) employees’ right to engage in protected concerted activity. Class or collective actions are one such type of concerted activity.
This week, the NLRB issued yet another decision refusing to enforce an arbitration agreement and class action waiver in Neiman Marcus Group Inc., 362 NLRB No. 157 (8/4/15). In a nutshell, the employee there filed a wage & hour class action lawsuit against Neiman Marcus in (yeah, you guessed it) California. Neiman raised an affirmative defense that the employee agreed to mandatory arbitration and further agreed to waive class action proceedings in any arbitration. The trial court sided with Neiman and sent the parties packing to arbitration.
The employee then filed an unfair labor practice charge at the NLRB challenging the validity of the arbitration agreement. True to form, the board held that the mandatory arbitration agreement and its class action waiver violated section 7 of the National Labor Relations Act, which creates the right to protected concerted activity.
In doing so, however, the board again ignored the 5th Circuit’s D.R. Horton decision expressly rejecting the NLRB’s identical arguments for refusing to honor arbitration agreements with class action waivers. More important, the board once again implicitly thumbed its nose at the Supreme Court, which for decades has made crystal clear that it strongly endorses, and enforces, arbitration agreements in virtually every context. (If you’re interested in the Supreme Court’s view of arbitration, and specifically class action waivers, see its decision in Concepcion.)
Neiman should probably appeal the NLRB’s decision for two reasons. First, it is highly likely that the 9th Circuit Court of Appeals, which could hear this appeal, would refuse to enforce the board’s decision. Why? A couple years ago the 9th Circuit in Richards v. Ernst & Young gave a favorable head nod to mandatory arbitration agreements, taking time to specifically call out the NLRB for refusing to enforce class action waivers in arbitration agreements.
The second reason Neiman may appeal this latest anti-arbitration decision is the NLRB awarded attorneys’ fees and costs against Neiman and in favor of the employee. The labor board rarely awards fees and costs. Avoiding such awards in the future is something Neiman and other employers may certainly want to see the 9th Circuit address when and if it handles this appeal.
And here’s the kicker. The employee in this case asked to withdraw its charge against Neiman Marcus a couple months ago, and the NLRB refused to allow her to withdraw it! For an agency that is supposed to act only in response to a filed charge or petition, and not unilaterally, do you think maybe the board has its own agenda to execute regardless what litigants might want to do?
The NLRB frequently speaks about anti-union animus when whacking employers who find themselves embroiled in an unfair labor practice dispute. This week’s Neiman Marcus decision confirms that the board itself may suffer from anti-arbitration animus. Sooner or later, this issue will make it to the Supreme Court, where you can all but bet the NLRB will lose this one. Until then, look for a slow, expensive, circuit-by-circuit battle where the outcome has all but been predetermined.
And just in case you missed the parenthetical in my opening paragraph, this NLRB decision applies to unionized and nonunionized employers alike, so don’t think you can ignore the NLRB because you don’t have a union to deal with. Also, if you’re an employer and don’t have an arbitration program in place – with a class action waiver – you may want to think about doing so.
Chris Bourgeacq frequently practices before the NLRB and has handled several arbitrations in a variety of areas. He also can help you design an arbitration program if you don’t have one. A happy and pleasant fellow, you can reach him at Chris@cbqlaw.com or check out his website at cbqlaw.com.