National Labor Relations Board’s position that agreements between employers and employees to resolve employment-related claims on an individual basis through binding arbitration, and which thereby waive or prohibit the bringing of such claims on a class or collective action basis, violate the guarantee in Section 7 of the National Labor Relations Act of employees’ right to engage in protected concerted activity. The Board’s position on this issue started with its 2012 decision in D.R. Horton, Inc., which was subsequently denied enforcement by a federal court of appeals.  Doubling down on that loss, in 2014, the Board issued D.R. Horton’s redux in Murphy Oil USA, Inc., in which it stubbornly adhered to its interpretation of the Federal Arbitration Act, despite the near unanimous rejection of that interpretation by every federal and state court to address the issue. 

In 2013, employees of Flyte Tyme Worldwide filed a class and collective action lawsuit in federal court against the company, seeking allegedly unpaid wages.  Flyte Tyme sought to enforce its policy that required that employees individually arbitrate their claims, and thereby avoid class and collective action litigation. The lawyer representing the plaintiffs in that case then filed an unfair labor practice charge with the NLRB, arguing that the policy violated D.R. Horton’s prohibition on class and collective action waivers.  Applying D.R. Horton, an Administrative Law Judge thereafter found that the employer’s maintenance and enforcement of its arbitration agreement violated the Act.

Flyte Tyme appealed the judge’s ruling to the Board in Washington, D.C.  While that appeal was pending, Flyte Tyme and the employees settled the federal court lawsuit, with Flyte Tyme agreeing to pay $900,000 to the eight plaintiffs in that case and the other class members.  Their lawyer then sought approval from the Board of the withdrawal of the related unfair labor practice charge. The NLRB regional office handling the charge noted that it did not oppose that request.

On March 30, a Board panel comprised of the NLRB’s three Democrat members refused to permit the withdrawal of the charge, saying that doing so would not effectuate the purposes and policies of the Act.  The panel acknowledged that the settlement fully addressed the private rights of the involved parties, but took issue with the fact that the settlement left in place the employer’s policy requiring that employees waive the right to engage in class or collective action litigation.  The panel thus concluded the settlement did not address the “public interest in protecting employees’ statutory right to engage in collective action regarding terms and conditions of employment” and that the continued maintenance of the policy containing the waiver would “continue to have a chilling effect on employees’ Section 7 rights to engage in collective action in the future.”

It’s reasonably safe to presume that when Flyte Tyme agreed to pay $900,000 to settle the federal court litigation, it believed it would be resolving all of the issues with the employees involved. Despite the complete lack of judicial support, the NLRB however has shown no signs of backing away from its position on class and collective action waivers. Thus, its refusal to permit withdrawal of the charge is not altogether surprising.  Although it is extremely likely that the employer here will eventually prevail, given that the courts have been nearly uniform in rejecting the Board’s position that class and collective action waivers in arbitration agreements run afoul of Section 7 of the Act, this decision is nonetheless a cautionary tale in that sometimes, even paying close to a million dollars in settlement may not actually result in a complete resolution, and that with the position taken by the Board, additional costs will have to be incurred to truly reach finality.