HR Company’s Arbitration Agreement Ruled Invalid

Arbitration agreements are a useful tool for employers, but companies must be mindful of the Board’s evolving interpretation of what constitutes a lawful arbitration agreement.

Employers Resource, a payroll and personnel services provider, performed human resources functions for a restaurant. Employers Resource gave a restaurant employee an arbitration agreement containing a mandatory arbitration provision. The employee testified that her manager told her that she had to sign the agreement as a condition of being paid. She signed the agreement and began working at the restaurant.

A dispute arose and the NLRB got ahold of the agreement. Employers Resource argued that the NLRB lacked jurisdiction because the restaurant was the “true employer.” However, when a business works with a professional employer organization like Employers Resource, the business enters a “co-employment model.” Under this model, the professional employer organization can also be on the hook for any unlawful activity.

The ALJ highlighted a previous Board decision that supports the proposition that an employer can be liable for restricting or interfering with employees’ rights regardless of whether it is an employer of those employees. In other words, Employers Resource is liable not necessarily because it is an employer, but because of its actions related to the arbitration agreement.

Matt Austin is a lawyer based in the Columbus, Ohio office of Roetzel & Andress, LPA who limits his practice to representing employers dealing with labor, employment, and OSHA matters. You can call Matt at (614) 723-2010 or email him at maustin@ralaw.com.

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