A National Labor Relations Board (“NLRB”) Administrative Law Judge (“ALJ”) found a company’s mandatory arbitration agreement violated the National Labor Relations Act (“NLRA”) despite the fact that its arbitration procedure permitted employees to act concertedly to challenge the terms of the agreement and provided the parties could jointly agree to class claims.

On July 2, 2012 ALJ Margaret Brakebusch followed the Boards’ oft-criticized decision in D.R. Horton, Inc., 357 NLRB No. 184 (2012) (discussed here in a January 9, 2012 post) by determining that Advanced Services Inc. (“Advanced”), an affiliate of General Electric, had violated the Act in two ways that will be of concern to companies with arbitration procedures.  See Advanced Services, Inc. and Tabita Sheppard Howard, Case Nos. 26-CA-6318 and 26-CA-71805.pdf.  Advanced, which runs a call center for appliance customers in Memphis, Tennessee, had mandatory arbitration procedures which prohibited class claims and also required confidentiality in the procedures. 

The Arbitration Procedures Involving Class Waivers

The Advanced procedures do contain a class action waiver but also have provisions different than those in D.R. Horton.  The procedures state:

Covered Employees and the company waive their right to bring any covered claims as, or against a representative or member of a class or collective action (whether opt-in or opt-out) or a private attorney general capacity, unless all parties agree to do so in writing.  All covered claims must be brought on an individual basis only . . . .  Without waiving the Company’s right to enforce this Procedure’s provisions regarding class and collective action waivers, nothing in this Procedure prohibits employees from acting concertedly to challenge the terms of the [arbitration agreement] by pursuing class or collective actions and they will not be subject to discipline or retaliation by the Company for doing so.   (Emphasis added).

Advanced argued that the D.R. Horton decision was wrongly decided and inapplicable because its arbitration agreement language was “sufficiently dissimilar” to that in D.R. Horton.  Indeed, the Advanced language specifically authorizes collective challenges to the agreement itself.  And, the class-waiver provision could be waived if both parties agreed.  Yet, the ALJ found that the language “does not eliminate the requirement for employees to bring their claims individually rather than collectively.” 

The ALJ also found the agreement did not specify when the class action waiver provision can be avoided:

The agreement does not clarify the circumstances in which [Advanced] would enter into such [a waiver agreement].  Without these written assurances, the language is hollow.  Employees may reasonably conclude that there are few, if any, circumstances in which [Advanced] would agree to relinquish the class waiver clause.”

Given these conclusions, the ALJ found that the agreement’s language “is likely to have a chilling effect on employees’ Section 7 rights and violates Section 8(a)(1), even in absence of enforcement.”

The Agreement’s Confidentiality Language

The Advanced arbitration agreement also contains confidentiality procedures, which are relatively common in these type of procedures.  The language provided:

I understand and agree that all proceedings under this Agreement . . . including the arbitration hearing and record, all documents exchanged in discovery or otherwise used, and all communications in connection with the resolution or arbitration of my covered claims shall be confidential and not disclosed to the public, except (a) to the extent that the company and I agree in writing otherwise; (b) as may be appropriate in subsequent proceedings to enforce or invalidate the arbitrator’s decision under this Agreement; or (c) as may be appropriate in response to a government agency or legal process. 

Advanced justified the confidentiality provisions as fostering trust and protecting personal information from distribution to other employees or the public in general.  Nevertheless, the ALJ determined the confidentiality provisions were unlawful:

[T]he total record evidence reflects that the confidentiality language in issue would reasonably bar employees from discussing the issues or circumstances related to the arbitration process in which they are involved.  Inasmuch as this prohibition would reasonably be construed by employees to bar them from discussing matters concerning their conditions of employment, employees are thus prohibited from engaging in activity that is protected by Section 7 of the Act.

So, the ALJ found the confidentiality language violates 8(a)(1) of the Act.

The Advanced decision illustrates the fact that the Board and its ALJs will follow D.R. Horton and find any agreement requiring individual arbitration to violate the Act.  Carefully drafted provisions allowing employees collectively to challenge the terms of the procedure will not make a difference.  Hence, if D.R. Horton stands, class action waivers in arbitration agreements subject to Board jurisdiction will be problematic. 

The Bottom Line:  The Board and its ALJs will continue to enforce D.R. Horton as written and likely will reject class waiver provisions regardless of language that preserves employees’ rights to challenge the class waiver, as long as the agreement at issue generally provides that claims must be brought individually.  This makes the challenge to the D.R. Horton decision pending in the Fifth Circuit (D.R. Horton, Incorporated v. NLRB, Case No. 12-60031) critically important.