Labor & Employment Law Daily NLRB: Volkswagen’s arbitration agreement unlawfully restricted access to Board and its processes
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Tuesday, March 17, 2020

NLRB: Volkswagen’s arbitration agreement unlawfully restricted access to Board and its processes

By Ronald Miller, J.D.

Although the mandatory arbitration agreement did not explicitly prohibit employees from charge filing, and although it excluded some NLRA claims from coverage, when reasonably interpreted, it impermissibly interfered with the right to file charges with the Board.

In consolidated cases, the NLRB ruled that an arbitration agreement, which VW Credit and its parent company, Volkswagen Group of America, required certain employees to sign, unlawfully interfered with the employees’ access to the Board and its processes. Although the employer had sent notices to employees to clarify that the agreement did not restrict their right to file charges with the Board, the notices did not comply with requirements in the agreement that changes must be in writing and signed by the employee and a Volkswagen executive. Because the agreement did not contain “savings clause” language, when reasonably interpreted, it impermissibly interfered with the employees’ access to the Board and its processes (VW Credit, Inc., March 12, 2020).

Review standard. The General Counsel issued a consolidated complaint against VW Credit and its parent company, Volkswagen Group of America (VWGoA), alleging that the companies each maintained “a mandatory arbitration agreement for certain of its employees that employees reasonably would believe bars or restricts their right to file charges with the Board.” The employers and General Counsel filed a joint motion to waive a hearing and decision by an administrative law judge and transfer the proceeding to the NLRB for a decision on a stipulated record.

In support of complaint allegations that the employers unlawfully maintained the disputed arbitration agreement, the General Counsel relied on the “reasonably construe” prong of the standard set forth in Lutheran Heritage Village-Livonia. However, in Boeing Co, the Board overruled Lutheran Heritage and replaced it with a new standard. The Board also decided to apply the new Boeing standard retroactively to all pending cases.

On October 29, 2018, the Board issued a Notice to Show Cause why it should not revoke its approval of the stipulation and remand the case to the regional director for further proceedings in light of Boeing. The General Counsel opposed remand, while the employers sought remand or, alternatively, permission to file a supplemental brief analyzing the arbitration agreement under Boeing. Because this case solely concerned the lawfulness of an arbitration agreement already in the record before it, the Board found that remand was unnecessary. The Board also found supplement briefing unnecessary, and determined to decide the case on the stipulated record.

Arbitration agreement. In essence, the arbitration agreement required certain Volkswagen employees to arbitrate civil claims related in any way to their employment (or termination of employment), including but not limited to employment discrimination or harassment on the basis of race, sex, religion, color, national origin, sexual orientation, disability, and veteran status. Claims for workers’ compensation or unemployment compensation benefits were not covered by the agreement. Among other claims not covered by the agreement were disputes governed by a collective bargaining agreement and matters covered by ERISA.

Notice of change. On October 30, 2015, the employers sent a notice to employees clarifying the agreement. The title of the notices announced a “Change” to the agreement. The notice stated that companies were revising the agreement to include the following sentence: “This Agreement does not restrict employee rights to file charges with the NLRB.”

But the notices did not change the agreement. Rather, the agreement expressly provided that it “may be modified or amended only by a writing signed by the employee and an officer of VWGoA,” and the notices were not such a writing. Moreover, there was no evidence in the record that either company had ever modified the agreement in the manner specified. Further, the agreement did not include the “savings clause” language contained in the notices. Consequently, the Board determined that the arbitration agreement unlawfully interfered with the employees’ access to the Board and its processes.

Since the Board’s ability to prevent unfair labor practices depends entirely on the filing of unfair labor practice charges, it held in Prime Healthcare Paradise Valley, LLC that Section 10(a) is a clear congressional command that arbitration agreements that interfere with an employee’s right to file charges with the Board cannot be lawfully maintained or enforced.

Where an arbitration agreement does not explicitly prohibit the filing of claims with the Board, but rather is facially neutral, the standard set forth in Boeing applies. Under that standard, the Board determines whether the arbitration agreement at issue, “when reasonably interpreted, would potentially interfere with the exercise of NLRA rights.” As explained in Prime Healthcare, an arbitration agreement that makes arbitration the exclusive forum for resolving all employment-related claims—and therefore, the exclusive forum for resolving claims arising under the NLRA—impairs employee rights, the free exercise of which is vital to the implementation of the statutory scheme.

Applying these principles, the Board found that the agreement at issue here interfered with employee rights under the Act and fell within Boeing Category 3. Although the agreement did not explicitly prohibit charge filing, and although it excluded some NLRA claims from coverage, it made arbitration the exclusive forum for resolving many claims arising under the Act. Accordingly, when reasonably interpreted, it impermissibly interfered with the right to file charges with the Board.

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