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Do Your Arbitration Agreements Have Chilling Effect on Employee Rights? Don't Be Left Out in Cold

Regular readers know that we have talked a lot about the National Labor Relations Board and arbitration agreements in the last few years.  It doesn’t look like we’re likely to stop talking about those two things anytime soon, either. winter cold jack nicholson

On October 26, 2015, the Fifth Circuit Court of Appeals – which has jurisdiction over Texas, among other states – held that an employer did not commit an unfair labor practice under the National Labor Relations Act (“NLRA”) by requiring employees to sign arbitration agreements where employees had to relinquish their rights to pursue class or collective claims in all forums and instead use individual arbitration.  Murphy Oil USA v. National Labor Relations Board, 2015 WL 6457613.  In essence, the  fifth Circuit re-affirmed its prior 2013 decision on this issue in D.R. Horton, Inc.

By way of background, Section 8(a) of the NLRA makes it unlawful for an employer to commit unfair labor practices by interfering with employees’ rights to engage in concerted activities for the purpose of collective bargaining or other mutual aid or protection.  In D.R. Horton, the Court held that an arbitration agreement violates the NLRA if employees would reasonably construe it as prohibiting filing unfair labor practice charges with the Board.  However, the Court further held that, (1) the NLRA does not contain a “congressional command overriding” the Federal Arbitration Act; and (2) “use of class action procedures…is not a substantive right” under Section 7 of the NLRA.

Murphy Oil’s original arbitration agreement (in effect before March 2012) included broad language that “any claims” must be resolved in arbitration.  However, Murphy Oil revised its arbitration agreement effective March 2012 to include language that “nothing in this Agreement precludes [employees] from participating in proceedings to adjudicate unfair labor practice charges before the [National Labor Relations Board].”  The Fifth Circuit found that in reading the contract as a whole, it would be unreasonable for an employee to construe the revised agreement as prohibiting the filing of Board charges.  In so concluding, the Court also fell short of requiring the kind of disclaimer Murphy Oil used in order to make an agreement compelling arbitration lawful.

At present, the question of whether employment arbitration agreements remain lawful may actually depend on where you do business as an employer.  The NLRB has consistently disregarded the position of the Fifth Circuit in all other jurisdictions throughout the country, and instead has taken the position in those other regions that arbitration agreements violate the NLRA because they prohibit employees from pursuing class actions as a form of collective relief for themselves.  Moreover, some think the Board hasn’t pressed this issue higher because it doesn’t want the United States Supreme Court – a Court which has been very favorable to arbitration the last decade or so – to rule against the Board and create a uniform rule in favor of such agreements for employers.

If you use a mandatory arbitration agreement in your workplace, or are considering using one, know that the legal landscape in this area is a bit tricky right now.  For that reason, consulting a trusted advisor on the propriety of them – considering the present state of the law – is assuredly advised.

© Steptoe & Johnson PLLC. All Rights Reserved.National Law Review, Volume V, Number 327


About this Author

Marcia L. DePaula, SteptoeJohnson, Labor Lawyer, FTC Statute, UCC

Marcia DePaula focuses her practice in the area of labor and employment law representing hospitals, manufacturers, and corporate clients. She has extensive experience in commercial and business litigation, including breach of contract actions, matters arising under the Uniform Commercial Code, banking litigation and compliance with advertising and consumer protection laws. She defends clients in matters involving FTC statutes, Fair Credit Reporting Act, Fair Debt Collection Practices Act and Truth-in-Lending Act.

 J.D. University of Pittsburgh...

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