In Service Employees International Union v. Montecito Heights Healthcare & Wellness Centre, LP, Case No. 31-CA-129747, the NLRB ruled that a skilled nursing facility’s arbitration provision in its alternative dispute resolution (“ADR”) policy requiring its unionized employees to waive their right to bring class actions or to act concertedly violated federal labor law. If you are non-unionized, do not stop reading here because this ruling has the potential of being applied to non-union workplaces.
The nursing facility’s ADR policy expressly prohibited “employees from joining a class action or representative action.”
Relying on precedent promulgated by the NLRB in Murphy Oil USA, Inc., 361 NLRB No. 72 (2014), enf. denied, 808 F.3d 2013 (5th Cir. Oct. 26, 2015), Judge Raymond P. Green held that the nursing facility violated Section 8(a)(1) of the National Labor Relations Act (“Act”) by maintaining a policy intended to require its employees to waive their right to bring or join a class action regarding their wages, hours, and terms and conditions of employment. Judge Green explained that he was “bound to follow Board precedent irrespective of contrary opinions by circuit courts, unless and until the Supreme Court makes a definitive ruling on the subject matter in dispute.” In other words, Judge Green did not want to run afoul of NLRB precedent.
Indeed, the Act does not create a right to class certification or the equivalent, but the NLRB clarified in D.R. Horton, Inc., 357 NLRB No. 184 (2012), that the Act does create a right to pursue joint, class, or collective claims without the interference of an employer-imposed handcuff. Nevertheless, the Fifth Circuit Court of Appeals refused to enforce the D.R. Horton, Inc. ruling, which was also rejected by the Second and Eighth Circuit Courts of Appeals.
Section 7 of the Act guarantees all employees, unionized or not, the “right . . . to engage in . . . concerted activities for the purpose of collective bargaining or other mutual aid or protection.” 29 U.S.C. § 157. According to the Supreme Court, Section 7 protects employees “when they seek to improve working conditions through resort to administrative and judicial forums. . . .” Eastex, Inc. v. NLRB, 437 U.S. 556, 566 (1978). To protect this right, Section 8(a)(1) prohibits an employer from interfering with, restraining, or coercing employees from exercising their rights guaranteed by Section 7. 29 U.S.C. § 158(a)(1).
In Murphy Oil USA, Inc., the NLRB held that a lawful arbitration agreement may not require an employee to waive their right to pursue statutory remedies. This is because it requires employees to forfeit their substantive rights to act collectively, and therefore nullifies the foundational principle that shapes labor policy. In fact, even before the Act was passed, Congress declared in the Norris-LaGuardia Act that individual agreements restricting employees’ concerted activities for the purpose of mutual aid or protection violated federal policy and were unenforceable. 29 U.S.C. §§ 102-104.
The NLRB explained that the “substantive nature of the right to group legal redress is what distinguishes the NLRA from every other statute the Supreme Court has addressed in its FAA jurisprudence.”
The nursing facility attempted a Hail Mary pass by arguing that its policy did not infringe on Section 7 rights because it was optional. It was of no consequence, however, to the administrative law judge that the nursing facility’s ADR policy was optional and not required as a condition of employment, because an employer violates the Act regardless of whether the ADR policy is mandatory or voluntary. Judge Green also ruminated about whether employees being asked to sign the ADR policy would even understand they had a right to refuse to sign it.
Based on this ruling, it would be prudent for employers to avoid requiring their employees to waive their right to maintain employment-related joint, class, or collective actions in all forums. This caution is also applicable to non-unionized workplaces because the Act’s Section 7 rights to engage in concerted activities for mutual aid or protection in the workplace setting apply to all employees, regardless of whether they are unionized.