NLRB Judge Finds Class Waiver in Franchisee’s Mandatory Arbitration Policy Violates NLRA

Once again, a National Labor Relations Board (“NLRB”) administrative law judge has ruled an employer maintained an arbitration agreement that illegally required workers to waive their right to engage in collective action as a condition of employment.  In Quality Dining, Inc. and Grayling Corporation (collectively “Quality Dining”), NLRB No. 04-CA-175450 (December 15, 2016), a NLRB judge found an Indiana corporation that franchised fast-food restaurants in several states violated the National Labor Relations Act (“NLRA”) when it required employees to sign an agreement to individually arbitrate all future claims against their employer including those arising under the NLRA.  In his ruling, the NLRB judge cited the Board’s decision in Murphy Oil which was overturned by the Fifth Circuit in 2015.

According to the judge:

Notwithstanding a variety of decisions by some circuit courts, until the Supreme Court makes a definitive ruling on this issue, I am bound to follow the Board’s current precedent.

This case is controlled by the Board’s decision in Murphy Oil USA, Inc., 361 NLRB No. 5 72 (2014), enf. denied, 808 F.3d 1013 (5th Cir., Oct. 26, 2015).  In Murphy Oil and subsequent cases, the Board has consistently held that requiring employees to execute arbitration agreements containing class action waivers is a violation of Section 8(a)(1) of the Act.

As a result, the NLRB judge ordered the corporation to stop enforcing the arbitration agreement as written and “[r]escind or revise the mandatory arbitration policy.”

This case is one of many that illustrate the current divide between the NLRB and several circuit courts regarding collective action waivers included in an employer’s mandatory arbitration agreement.  It is apparent from his brief ruling that, like most of us, the administrative law judge who heard this case expects the United States Supreme Court to and rule on the issue soon.

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