Optional Arbitration Agreements May Violate the NLRA


As appeared in the Human Resource of Central Ohio (HRACO) monthly newsletter


Optional Employee Arbitration Agreements Allegedly Violate the NLRA

When I first learned about this, I thought “Just how far will the National Labor Relations Board go to exert its influence over businesses without unions?” If you follow my articles in this newsletter or read the alerts that I’ve sent out over the past few months, you know that the NLRB is regulating areas it has never before regulated. And because of the Board’s recent aggressive expansion, non-union companies must pay extremely close attention to what the NLRB is doing.

In January 2012, the Board prohibited employers from requiring employees to sign arbitration agreements preventing employees from joining other workers in class-action arbitration proceedings or lawsuits. In essence, the Board decided that a “you cannot file an employment related class action lawsuit against this company” policy interfered with the freedom of employees to act concertedly regarding terms and conditions of employment – a hallmark of the National Labor Relations Act. I hope that none of your companies still have the blanket policy. If so, time to change it.

But what do you change it to? Here’s a hint of what not to change it to: Do not change the policy from “you cannot file an employment related class action lawsuit against this company” to “you cannot file an employment related class action lawsuit against this company unless you opt out of this policy within your first 30-days of working here.” The NLRB does not like the opt-out provision, either.

24 Hour Fitness USA, Inc., a national chain of non-union health clubs, has a policy that requires employees to submit all employment related disputes to individual arbitration unless the employee opts out of that requirement within thirty days of receiving the company handbook. To opt out, the employees must request and fill out a company provided form. Once the form is submitted back to the company, that employee is free to join a future employment related class or collective action against 24 Hour Fitness.

The National Labor Relations Board believes that requiring employees to affirmatively opt out of individual arbitration agreements within 30 days of starting a job interferes with their ability to act concertedly, and the Board has filed a Complaint against 24 Hour Fitness on this theory. Interestingly, the NLRB’s press release did not mention the 30-day opt out provision. Instead, it said, “Since at least the summer of 2010, the company has enforced its no-class-action policy by asserting it in litigation brought by employees in numerous cases, seven of which are cited in the complaint. In each case, employees, who are not represented by a union, sought to bring workplace-related claims, such as wage and hour violations, on a class-wide basis.”

Although most business owners and many human resource professionals ignore the NLRB if their workers are not in a union, the NLRB does not ignore non-union workers. Over the past few years, the NLRB has consistently extended its authority to non-union workforces, like 24 Hour Fitness, by broadening its ability to govern protected concerted activity. This case is a perfect example: the Board is acting as a watchdog to ensure non-union employees can file class action wage and hour complaints. This is likely not what the drafters of the National Labor Relations Act envisioned in 1935 when they stated that the purpose of the Act was to encourage:

the practice and procedure of collective bargaining and by protecting the exercise by workers of full freedom of association, self-organization, and designation of representatives of their own choosing, for the purpose of negotiating the terms and conditions of their employment or other mutual aid or protection.

The law from January that prohibits mandatory arbitration of employment claims is being challenged and may be overturned. Likewise, this new Board law prohibiting mandatory arbitration of employment claims with an opt out provision is also being challenged. I do not know when a decision will be rendered or whether further rounds of appeals will be held. So, prudent employers who have policies that require all employment claims be arbitrated or that require employees to opt out of arbitrating employment claims should change their policies, at least for now.

Matt Austin is a Columbus, Ohio labor lawyer who owns Austin Legal, LLC, a boutique law firm that limits its representation to employers dealing with labor, employment, and OSHA matters. Matt can be reached by email at
Matt.Austin@Austin-Legal.com or by phone at 614.285.5342.