Arbitration, as a means to redress disagreements between labor and management, has a long history of being beneficial as a procedure to settle labor disputes. Thus, an arbitration proceeding that is embodied in a labor agreement, with specified procedures that have been agreed upon through the representative of employees, can be an effective source of protection for employees.
However, arbitration, when imposed unilaterally by an employer on its unrepresented employees as a condition of employment, can be instead a source to limit employee rights.
Since at least 2001 it has been the law of the land that employers can unilaterally require their individual employees, who are not represented by a union, to arbitrate all disputes arising out of their employment. The United States Supreme Court so held in Circuit City Stores v. Adams.
The end result of the Court’s Circuit City Stores decision is that an employer can force its employees who are not represented by a union to forego their right to sue the employer in court for violations of any number of laws which may govern the employment relationship. Thus, employees have little if any individual bargaining power to resist employer efforts to force employees to submit claims to arbitration that arise under, for example, the Civil Rights laws, the Fair Labor Standards Act, the Family and Medical Leave Act and other laws governing terms and conditions of employment. Typically, in addition to forcing employees to waive their right to sue in court, or pursue their claims before an administrative agency, the employer will unilaterally establish the procedures that govern arbitration, as well as who the arbitrator will be.
Does anyone think that arbitration procedures crafted by an employer are intended to benefit individual employees?
While the prospects for avoiding arbitration are slim in the individual employment context, at the very least employees still have some recourse with the National Labor Relations Board.
In U-Haul Company of California, the NLRB ruled that it was an unfair labor practice for an employer to maintain an arbitration requirement that led employees to believe that unfair labor practices were subject to mandatory arbitration, rather than for disposition by the National Labor Relations Board.
Most recently, the National Labor Relations Board has gone further and found that individual arbitration provisions that limit the ability of individual employees to pursue class-wide grievances through such provisions are also unfair labor practices. In D. R. Horton, decided in January of this year, the Labor Board re-iterated its long-held position that individual employees have the right to engage in concerted activity and that concerted legal action against an employer that addresses wages, hours and working conditions is concerted action protected by the National Labor Relations Act. The Board emphasized that:
[t]o be protected by [the National Labor Relations Act], activity must be concerted, or “engaged in with or on the authority of other employees, and not solely by and on behalf of the employee himself.”…When multiple named-employee-plaintiffs initiate the action, their activity is clearly concerted. In addition, the Board has long held that concerted activity includes conduct by a single employee if he or she “seek[s] to initiate or to induce or to prepare for group action.”…Clearly, an individual who files a class or collective action regarding wages, hours or working conditions, whether in court or before an arbitrator, seeks to initiate or induce groups action and is engaged in conduct protected by [the National Labor Relations Act].
Of course, the Board’s decisions outlined above only apply to individual arbitration agreements that seek to require the arbitration of unfair labor practices or seek to restrict protected concerted activity in the form of class-based legal action addressing wages, hours or working conditions.
While the decisions of the National Labor Relations Board do not overturn the inherent unfairness of mandatory arbitration of employment claims unilaterally imposed by employers, these decisions afford some modicum of protection that should be considered when addressing the viability of mandatory arbitration in the individual employment setting.
Gallon, Takacs, Boissoneault & Schaffer Co. L.P.A.