The NLRB Rules Mandatory Arbitration Agreement As Overbroad
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The NLRB Rules Mandatory Arbitration Agreement As Overbroad

In Country Wide Financial Corporation, 369 NLRB No. 12 (2020) (Countrywide), the National Labor Relations Board (“Board”) ruled that an mandatory arbitration agreement violated the National Labor Relations Act (the “Act”) because it restricted an employees’ ability to file and pursue unfair labor practice charges before the Board.

The arbitration agreement under review in Country Wide contained a general provision that “[a]rbitration is the parties’ exclusive remedy for covered claims,” which were defined as claims arising out of, relating to, or associated with the employee’s employment relationship and claims for violation of federal statutes.  The contested arbitration agreement also contained an exclusion clause which stated that “[n]othing in this Agreement shall be construed to require arbitration of any claim if an agreement to arbitrate such claim is prohibited by law.”

Applying the Board’s recent decisions Prime Healthcare Paradise Valley, LLC, 368 NLRB No. 10 (2019) (Prime Healthcare) and Everglades College, Inc. d/b/a Keiser University, 368 NLRB No. 123 (2019) (Everglades), the Board concluded that the language in the arbitration agreement making arbitration the exclusive forum for resolution of employment-related claims was unlawfully broad and fell within Boeing Category 3 (which includes rules that the Board designates as unlawful to maintain because they would prohibit or limit NLRA-protected conduct, and the adverse impact on the NLRA rights, “and no legitimate justification outweighs, or could outweigh, the adverse impact . . . .” (Emphasis added.)

First,  the Board noted that while the arbitration agreement was facially neutral and did not explicitly prohibit the filing of unfair labor practice charges , the agreement when “reasonably interpreted, would potentially interfere with NLRA Rights” under the standard articulated in The Boeing Company, 365 NLRB No. 154 (2017) (Boeing).  Specifically, the Board reasoned that the statement that “[a]rbitration is the parties’ exclusive remedy for covered claims” would be reasonably interpreted by employees to restrict the filing of charges with the Board.

Second, the Board concluded that the exclusion clause was too vague to salvage the agreement.  Notwithstanding the fact that an employee would understand that an arbitration does not apply where “prohibited by law,” the Board reasoned that the exclusion “leaves the reasonable employee in the dark as to what is prohibited by law” because the “language remains impermissibly vague and ambiguous as to whether it applies to claims that the NLRA has been violated.” (Emphasis in original.)

The Board has approved exclusion clauses that specifically and simply refer to claims that could be brought before the Board.  See, e.g., Private National Mortgage Acceptance Corporation, 368 NLRB No. 126 (2019); Briad Wenco, LLC d/b/a Wendy’s Restaurant, 368 NLRB No. 72 (2019).

In light of the Board’s Countrywide Financial decision, companies will want to re-evaluate their arbitration agreement exclusion clauses to ensure that they do not unlawfully restrict access to the Board and its processes.


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