Lack of inclusion in arbitration agreement didn’t make class action waiver unenforceable under NLRA
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Friday, August 11, 2017

Lack of inclusion in arbitration agreement didn’t make class action waiver unenforceable under NLRA

By Ronald Miller, J.D.

The fact that a class or collective action waiver was a stand-alone agreement, and not included in an arbitration agreement, did not mean that it infringed on employees’ rights protected by Section 7 of the NLRA, ruled the Fifth Circuit, in a reprise of its recent decision in Convergys Corp. v. NLRB. Additionally, the appeals court concluded that the waiver did not independently violate Section 8(a)(1) because employees would not reasonably interpret it to restrict their right to file unfair labor practice charges with the Board. Rather, under the circuit’s binding precedent, the waiver did not violate Section 8(a)(1) explicitly, and it could not otherwise be reasonably understood to violate the Act. Accordingly, the employer’s petition for review was granted, and the Board’s cross-petition for enforcement was denied. Judge Higginbotham filed a separate opinion concurring in part and dissenting in part (LogistiCare Solutions, Inc. v. NLRB, August 9, 2017, Elrod, J.).

Class action waiver. LogistiCare required its employees and job applicants to sign a class or collective action waiver by which they waived any right to be a representative for, or member of, a class or collective action lawsuit against it. One applicant who signed the waiver brought an unfair labor practice charge with the NLRB. The Board in turn brought a complaint alleging the employer violated Section 8(a)(1) of the NLRA by requiring employees and applicants to sign the waiver. In particular, the Board alleged that: (1) the waiver’s prohibition on engaging in class or collective litigation infringed on employees’ protected rights protected by Section 7; and (2) the waiver independently violated Section 8(a)(1) because employees would reasonably interpret the waiver to restrict their right to file charges with the Board.

An administrative law judge concluded that the waiver violated Section 8(a)(1). In a 2-1 decision, a three-member panel of the Board affirmed the ALJ’s findings. The Board concluded that Section 7 guarantees employees the right to participate in class and collective actions. It distinguished the Fifth Circuit’s rulings in D.R. Horton, Inc v. NLRB and Murphy Oil USA, Inc. v. NLRB, because the waivers in those cases were contained within arbitration agreements governed by the Federal Arbitration Act. Next, the Board concluded that the waiver was “independently unlawful” because employees could reasonably read the rule as restricting their right to file unfair labor practice charges with the Board.

Section 7 rights. Determining whether an employer’s action infringes a Section 7 right—and therefore violates Section 8(a)(1)—requires a two-step inquiry. First, the court must determine whether the employer’s conduct explicitly restricts activities protected by Section 7. Second, even if the employer’s action does not “explicitly” infringe on a Section 7 right, it still violates Section 8(a)(1) if employees would reasonably construe the language to prohibit Section 7 activity.

Explicit waiver. The Board first found that the waiver “explicitly” violated Section 8(a)(1). In particular, it concluded that an employee’s right under Section 7 “to engage in other concerted activities” includes participation in class or collective action litigation. The Fifth Circuit pointed out that it addressed that precise issue in Convergys. In that case, the appeals court held that under its binding decision in D.R. Horton, Section 7 does not confer a substantive right to participate in class or collective action litigation and therefore forecloses the Board’s argument. Accordingly, the court held that the Board erred in concluding that the waiver violated Section 8(a)(1) explicitly.

Independent violation of Section 8(a)(1). The Board also ruled that the waiver independently violated Section 8(a)(1) because employees would reasonably interpret the waiver to restrict their right to file charges with the Board. Language that does not violate Section 8(a)(1) explicitly might still do so if “employees would reasonably construe the language to prohibit Section 7 activity.” In D.R. Horton and Murphy Oil, the appeals court considered whether certain class and collective action waivers would be reasonably understood to prohibit bringing charges to the Board. The Board had found that the class action waivers in those cases would be reasonably understood to prohibit bringing charges to the Board.

However, as LogistiCare pointed out, the language of the waiver in this case was far less expansive than the provisions in D.R. Horton and Murphy Oil. It refers to “trial lawyers,” “trial by jury,” and “lawsuits,” and did not contain generic references to “claims,” or “disputes.” Nor did the waiver reference an “agency,” “other civil proceeding,” or anything else that would suggest that it was intended to prohibit employees from bringing charges to the Board. The absence of such capacious language in the LogistiCare’s waiver strongly suggested that a reasonable layperson would not construe the waiver’s references to “lawsuits” or “suits” to preclude bringing charges to the Board. Accordingly, the court granted LogistiCare’s petition for review and denied the Board’s cross-petition for enforcement.

Partial concurrence and partial dissent. In a partial dissent, Judge Higginbotham would uphold the Board’s determination that an employee could reasonably interpret the language of LogistiCare’s waiver to restrict the employee’s right to bring unfair labor practice charges with the Board. Read from the position of a non-lawyer, the dissent disagreed with LogistiCare’s claim that because the waiver included the words “lawsuit” and “trial lawyers,” any reader would necessarily understand that the waiver relates only to judicial, not administrative, proceedings. However, Judge Higginbotham agreed with the majority that the Fifth Circuit’s recent decision in Convergys foreclosed the Board’s alternative argument that the waiver violated Section 8(a)(1) by requiring employees to waive the ability to participate in class or collective action litigation.

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