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NLRB Fight Against Class Action Waivers

For several years, the National Labor Relations Board (NLRB) has taken the position that the National Labor Relations Act (NLRA) prohibits employers –even employers with no unions–from requiring employees to waive their rights to bring class action claims in arbitration. The reasoning is that class actions are a form of employee collective activity that the NLRA protects. The NLRB’s position clashes with the broad leeway which the United States Supreme Court–under the leadership of former Justice Scalia–has given to employers under the Federal Arbitration Act.

Several Supreme Court decisions have upheld the right of employers to require employees both to engage in arbitration rather than litigation and to exclude class claims. The California courts finally began to yield to the U.S. Supreme Court on this issue except for the waiver of so-called PAGA actions, which are brought by employees and their lawyers as “private attorneys general” to collect penalties for the State of California. Currently PAGA claims proceed in courts while underlying claims of wage and hour violations proceed in arbitration, although the courts typically put the PAGA claims on hold while the wage claims are being arbitrated.

Now cases examining the tension between the NLRA, as interpreted by the NLRB, and the FAA are making their way to and through the various courts of appeals, with varying results. The inconsistent decisions make this an issue that the U.S. Supreme Court likely will have to resolve. Without Justice Scalia to defend arbitration as a favored method to resolve disputes, the outcome is uncertain. Employers need to review their arbitration policies and keep an eye on developments on this issue.