The NLRB Issues Major Class Action Waiver/Mandatory Arbitration Ruling
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The NLRB Issues Major Class Action Waiver/Mandatory Arbitration Ruling

In Cordúa Restaurants, Inc., 368 NLRB No. 43 (2019), the National Labor Relations Board (“Board”) issued its first major decision following the Supreme Court’s 2018 ruling in Epic Systems, addressing a number of issues of first impression and providing guidance on the permissible scope and implementation of class action waivers.  

 In Cordúa, a group of employees had filed a collective action under the FLSA.  In response, the employer promulgated and maintained a revised arbitration agreement, requiring employees to agree not to opt in to class or collective actions.  In distributing the revised agreement, the employer explained that employees would be removed from the work schedule if they declined to sign it.  In addition, another employee was discharged for filing a class action wage lawsuit against the employer and discussing wage issues with his fellow employees.

The Board administrative law judge found the employer had unlawfully promulgated and maintained an arbitration agreement that required employees, as a condition of employment, to waive their rights to pursue class or collective action and that the employer had unlawfully threatened employees with reprisals for refusals to sign the agreement. The administrative law judge also held that the employer had unlawfully discharged the employee who engaged in protected activity by filing the class action lawsuit and discussed wage issues with his coworkers.

 The Board reversed in part and affirmed in part the administrative law judge’s decision, and in the course of doing so addressed some issues of first impression involving class action waivers and mandatory arbitration agreements.

First, the Board held that the Act does not prohibit employers from promulgating class action waivers even where, as here, the promulgation was directly in response to Section 7 activity related to the filing of a class action wage lawsuit, and aimed at preventing employees from opting in to the class action. The Board reasoned that opting in to a collective action is merely a procedural step required to participate in a collective action, and thus an arbitration agreement that prohibits employees from opting in to a class or collective action does not restrict the exercise of Section 7 rights. Accordingly, the employer’s promulgation of the revised arbitration agreement did not violate the Act.

Second, the Board found that the Act does not prohibit employers from threatening to discipline or discharge an employee who refuses to sign a mandatory arbitration agreement.  Noting that Epic Systems permits an employer to condition employment on employees entering into an arbitration agreement that contains a class- or collective-action waiver, the Board reasoned that that the employer’s statement amounted to an explanation of “lawful consequences of failing to sign an agreement and expression of a view that it would be preferable [to the employees] not to be removed from the schedule.”

Third, and significantly, the Board adopted the judge’s holding that employees cannot be disciplined or discharged for actually filing or participating in a class or collective action over wages, hours or other terms and conditions of employment.  The Board quoted  Memorandum GC 10-06 (June 10, 2010), in which then General Counsel Ronald Meisburg (now Special Counsel with Hunton Andrews Kurth) explained that employees “cannot be disciplined or discharged for exercising rights protected under Section 7 by attempting to pursue a class action claim.  Rather, the employer’s recourse in such situations is to present to the court the individual waivers as a defense to the class action.”

The Cordúa decision represents a key development in the Board’s jurisprudence on class action waivers and the care that must be taken to protect rights guaranteed under both the Federal Arbitration Act and the National Labor Relations Act.


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