National Labor Relations Act

Robert Half ADR Case Half-Baked

Legal publications and some lawyers have touted a recent federal appeals court decision in Philadelphia as affirming the right of employers to mandate that employees both (1) waive their rights to participate in class action lawsuits, and (2) agree to arbitrate any employment issue individually, and not as part of a group of employees.

Unfortunately, this one ain’t over until the Supremes sing.

The preliminary reports about the decision by the U.S. Court of Appeals for the Third Circuit, Opalinski v. Robert Half International, Inc., ignore that the court in that case expressly noted that the plaintiffs failed to raise an argument that might have determined the case differently.

In particular, the plaintiffs – former staffing managers at personnel placement firm Robert Half – never raised arguments that their binding arbitration agreements violated the National Labor Relations Act (NLRA).  This omission is a head-scratcher, as the National Labor Relations Board and several appeals courts have held that an employee agreement that deprives an employee of the right to bring his or her claims against the employer “collectively” with other employees violates the NLRA protection of “concerted activity” with other employees relating to the terms and conditions of employment.

As we wrote previously, this issue is now before the U.S. Supreme Court and should be decided later this year.  So, the Third Circuit’s Opalinski decision, rather than staking out a reliable marker as to employee rights in the circuit states of Pennsylvania, New Jersey and Delaware, really is simply a reflection of what happens when plaintiffs’ lawyers fail to make an important legal argument.

As a result, we do not recommend that employers or employees make any decisions or changes in their employment agreements based on Opalinski.  Instead, make like Diana Ross and wait for the Supremes to chime in.

Michael Homans is a Labor & Employment attorney and founding partner of HomansPeck LLCFor more employment law updates, including news and links to important information pertaining to legal developments that may affect your business, subscribe to Michael’s blog, or follow him on Twitter @EmployLawUpdate.


Mandatory Waiver of Employee Class Actions Up for Supreme Court Review

Employers will soon have much more clarity on how far they can go to require employees to sign binding arbitration agreements that prohibit employees from participating in class action lawsuits against their employers.

Earlier this month, the U.S. Supreme Court agreed to review a set of appellate court decisions that have split on the issue of whether class action (and collective action) waivers in employment agreement arbitration clauses violate the National Labor Relations Act (“NLRA”). The cases are captioned National Labor Relations Board v. Murphy Oil USA, Epic Systems Corp. v. Lewis, and Ernst & Young LLP v. Morris.

Most courts over the past decade have ruled that the Federal Arbitration Act, and supporting decisions by the Supreme Court, gave employers great leeway to mandate that employees agree to arbitrate all disputes as a way of avoiding the expense and uncertainty of court litigation.  The Federal Arbitration Act provides that written contracts to arbitrate a dispute generally shall be “valid, irrevocable, and enforceable,” except when there are grounds “at law or in equity” to revoke such an agreement.

Following the Federal Arbitration Act’s support of arbitration of employment disputes, many employers expanded their employees’ binding arbitration clauses to include provisions that prohibit participation in any class or collective action lawsuits.  This has been an effective tool for employers to fight back against the recent boom in class action overtime and discrimination litigation, which, in some cases, has mushroomed into lawsuits involving thousands of employees and tens of millions of dollars in damages and settlement payments.  Encouraged by the success of such provisions, many employers expanded the prohibitions even further, to preclude any type of “collective” action in employment disputes, requiring instead that employees must arbitrate their disputes on an individual basis only.

Such class action and collective action waivers have been approved by the Supreme Court in non-employment contexts, such as consumer goods and services contracts, in which the purchasers of goods or services agree not to participate in class or collective actions against the seller, but, instead, agree to arbitrate their individual claims.

The employment agreements, however, will be reviewed by the Supreme Court against a more complicated legal backdrop: the NLRA has provided since 1935 that employees have the right to form unions, bargain collectively, and, importantly here, “to engage in other concerted activities for the purpose of . . . mutual aid or protection.”  These “Section 7 rights” of  employees to engage in “concerted activities” have long been interpreted by the Supreme Court to nullify contracts that require employees to renounce such rights.

So, the basic question before the Supreme Court now is whether binding arbitration clauses that include a waiver of the right to bring a class action or collective action violate the NLRA’s mandate that employees be free to engage in “concerted activities” with other employees.  In the Epic Systems decision, the Seventh Circuit Court of Appeals held that the provision did impermissibly violate the NLRA, noting that the Supreme Court has previously ruled that the use of administrative and judicial forums is a protected concerted activity, and that other courts have held that  participation in a collective or class action lawsuit is a protected concerted activity.  The Ninth Circuit Court of Appeals agreed with this argument in the Ernst & Young case.  The Fifth Circuit disagreed in the Murphy Oil USA decision, and an earlier D.R. Horton, Inc. v. NLRB ruling.

From our review, there certainly is no question that an employer can require its employees to arbitrate their disputes, pursuant to the Federal Arbitration Act and prior Supreme Court rulings.  At issue now is the second part of the contract clauses at issue, which requires that employees only arbitrate their claims individually, and not through any collective or class action process.

It is difficult and dangerous to predict what the Supreme Court will do with these cases, especially with the likelihood that the ninth Justice to decide the matter soon will be appointed by newly elected President Trump, who is undeniably pro-business.

As a result, employers that have such mandatory arbitration/class action waiver clauses in their employment agreements must understand that those provisions may soon be nullified or limited, requiring new agreements in the future.  In addition, employers contemplating imposing such restrictions on employees in the next few months should consider whether they want to take the risk that the Supreme Court will uphold the clauses under the Federal Arbitration Act, or consider more limited provisions that do not run afoul of the NLRA.

We will update readers once the Supreme Court renders a decision – expected later this year – but, in the meantime, we offer these options to consider:

  • Instead of barring any type of collective action, employers should consider clauses that require all collective actions to be brought in arbitration.  This would avoid conflicts with the NLRA and, in our experience, greatly reduce the risk and liability of large class actions or collective actions by employees, as most plaintiffs’ lawyers disfavor arbitration.
  • Require that each employee participating in an arbitration, individually or collectively, must voluntarily “opt in” to such a dispute with a written certification, and that state and federal procedural rules as to class and collective actions and notice shall not apply.  This is a procedural restriction, not a substantive one, and thus has a much greater chance of surviving court scrutiny, even under the Epic Systems analysis. Such a clause will protect an employer against state and federal class action rules and written notice and disclosure requirements, which often add significant expense to class action cases and spawn extensive expansion of a single employee’s litigation to hundreds or thousands of employees who otherwise would not voluntarily participate.
  • Provide a savings clause in employment agreements stating that if any portion of the restriction is deemed unlawful, then the remainder of the agreement shall remain enforceable.
  • Instruct your employment counsel to schedule a review of such clauses in your employment agreements once the Supreme Court has issued its decision.  If you don’t have such clauses, that will be the perfect time to add them, with Supreme Court guidance hot off the presses.  If you do have them, that will also be the perfect time to decide whether revision is needed.

Michael Homans is a Labor & Employment attorney and founding partner of HomansPeck LLCFor more employment law updates, including news and links to important information pertaining to legal developments that may affect your business, subscribe to Michael’s blog, or follow him on Twitter @EmployLawUpdate.

Ban the Box, Binding Arbitration Agreements, FLSA Requirements

New Year’s Resolutions to Stay Out of Trouble at Work in 2016

office partyyyy

With the New Year upon us, this is the perfect time to consider whether your employment policies and
practices need updating or fine-tuning.  Based on recent developments in the law and our experience advising hundreds of employers and employees in 2015, here are five recommended New Year’s Resolutions to stay out of trouble at work:

  1. Consider implementing mandatory and binding arbitration agreements for your workforce, including express waivers of the right to a jury trial and the right to participate in collective or class actions. Per our previous Updates, these agreements must be properly drafted to be enforced, but, if that is done, then they can help an employer avoid thousands and even millions of dollars in legal fees, liabilities and management headaches.
  2. Prepare for Overtime-ageddon. President Obama and the U.S. Department of Labor have proposed new regulations under the Fair Labor Standards Act that would more than double the minimum base salary required for the most common exemptions to overtime pay.  Although recent reports indicate the regulations will not be finalized and take effect until late this year or early 2017, now is the perfect time to audit your company’s wage and hour compliance and take steps to make any cost-saving changes and workforce adjustments before the new, tougher regulations take effect. Updating job descriptions is one powerful step that can support appropriate wage and hour classifications.
  3. Be nicer to job applicants. Numerous states and cities recently have adopted strict measures limiting what and when employers can ask job applicants about their criminal records.  Be sure your company complies with these various “ban the box” laws.  Also check your company’s compliance with the federal Fair Credit Reporting Act, which requires mandatory disclosures and notices to employees whenever an employer seeks background checks by a third party on employees or applicants, or uses the results to make employment decisions.
  4. Keep up with the electronic age. Yes, Virginia, there is an Internet. Most workers are using electronics and mobile devices throughout the day, yet their employee handbooks are often still stuck in the horse-and-buggy days.   Do you have a “don’t text and drive” policy, as recommended by OSHA?  Are there written measures that protect your company’s electronic systems and data from internal misappropriation or external cyber-attacks?  What does your company do with the electronic data on an employee’s personal phone, tablet or computer when he or she resigns or is fired?  Are you limiting non-exempt employees’ after-hours access to work email to avoid potential wage and hour violations?  If you don’t know the answer to one or more of these questions, your company could be facing an expensive wake-up call.  Get help.
  5. Get more organized – find those employment agreements. Often when we are called on to help a client involved in non-compete litigation, we find that key employment agreements are missing or not signed.  This can be avoided by conducting regular reviews of personnel files to ensure all necessary documents and agreements are signed and preserved.  Not having the signed documents can severely hamper an employer’s ability to enforce its rights and protect itself from unfair competition and stolen trade secrets.  This simple annual review can be conducted by a clerical employee and do not require legal fees or expenses.  Do it now, and avoid that painful “D’oh!” moment in the future.

Bonus resolution, free to subscribers:

  • Do not procrastinate. The Update staff needs to work on this one, as this article was supposed to go out in December!

Michael Homans is a Labor & Employment attorney and founding partner of HomansPeck LLCFor more employment law updates, including news and links to important information pertaining to legal developments that may affect your business, subscribe to Michael’s blog, or follow him on Twitter @EmployLawUpdate.