Arbitration Agreements May Violate the NLRA Absent Carve-outs

    Locke Lord Publications

    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.‎

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