As a matter of federal law, employers can require employees to agree to arbitrate any employment dispute.  But, can that arbitration agreement force an employee to arbitrate only individual claims, not class (or collective) claims?  Recently, the National Labor Relations Board said NOClick here for the Board’s ruling.

This ruling appears at odds with a ruling by the United States Supreme Court in AT&T Mobility LLC v. Conception.  There, the Supreme Court considered a California state law that invalidated any arbitration agreement that included a mandatory waiver of class claims.  The Supreme Court noted that the right to pursue class claims is a procedural right, not statutory, and overturned the California law.  Some employers then adopted arbitration agreements that included waivers of an employee’s ability to pursue class or collective actions. 

The Labor Board ruled that the right to pursue a class or collective action is a substantive right, guaranteed under Section 7 of the National Labor Relations Act – the right to engage in protected, concerted activity.  The Labor Board knows it cannot overrule the Supreme Court, but tried to explain that the issue before it was different from, and therefore not controlled by, the Supreme Court’s ruling.

Why does this matter?

  • If you are an employer who has such an arbitration agreement (one that mandates only individual claims in arbitration), that portion of the agreement is now unlawful under the new Board law and will not be enforced.
  • If you are considering such an arbitration agreement, requiring a provision that allows only individual claims in arbitration is unlawful under the NLRA.
  • What was considered a “settled” question after the U.S. Supreme Court’s ruling is now back in “limbo”.  More litigation (and uncertainty) over this issue is sure to follow.