In Prime Healthcare Paradise Valley LLC, 368 NLRB No. 10 (2019), the National Labor Relations Board ruled that an arbitration agreement that did not explicitly limit an employee’s ability to file charges with the Board nonetheless violated the National Labor Relations Act (the NLRA). The arbitration agreement at issue in Prime Healthcare stated:
Except as otherwise provided in this Agreement, the Company and the Employee hereby consent to the resolution by binding arbitration of all claims or controversies for which a federal or state court would be authorized to grant relief, whether or not arising out of, relating to or associated with the Employee’s employment with the Company.
In addition to specifying that the parties’ agreement covered wage and hour, breach of contract, and discrimination and harassment claims under various federal and state laws, the agreement also applied to “claims for violation of any federal, state or other governmental constitution, statute, ordinance, regulation, or public policy[.]” The agreement carved out certain claims, including assertions for worker’s compensation and unemployment compensation benefits, but it did not specifically reference claims under the NLRA.
The Board reviewed the agreement pursuant to the standard set in Boeing Co., 365 NLRB No. 154 (2017), under which the Board first determines whether an employment policy could potentially interfere with an employee’s NLRA rights, and if so, whether the employer’s justification for the policy outweighs any potential interference with the employee’s NLRA rights. In Boeing, the Board created three categories of policies: (1) those that are always lawful because, when reasonably interpreted, they do not interfere with NLRA rights or because any adverse impact on NLRA rights is outweighed by the employer’s need for the policy; (2) policies that require individualized review to determine their legality; and (3) policies that are always unlawful because they interfere with an employee’s NLRA rights in a manner not justified by the employer’s interest in the policy.
Under this analysis and despite the fact the agreement did “not explicitly prohibit charge filing (or the exercise of other [NLRA] rights),” the Board ruled that the Prime Healthcare agreement fell into category 3 and violated the NLRA. The Board arrived at this conclusion by reviewing the plain terms of the agreement, which (1) required the arbitration of “all claims or controversies for which a federal or state court would be authorized to grant relief[;]” (2) applied to claims under any federal statute; and (3) did not create an exception for claims under the NLRA. As such, the agreement “ma[d]e arbitration the exclusive forum for the resolution of all claims, including federal statutory claims under the [NLRA].”
Although the employer did not offer a justification for the agreement’s interference with NLRA rights, the Board ruled that, “as a matter of law, there is not and cannot be a legitimate justification for provisions, in an arbitration agreement or otherwise, that restrict employees’ access to the Board or its processes.” According to the Board, a ruling to the contrary would undermine the entire purpose of, and policy behind, the NLRA, which empowers the Board to file complaints against parties engaged in unfair labor practices.
In light of this ruling, employers review their current arbitration agreements for compliance with the Prime Healthcare decision.