Arbitration Agreements May Not Restrict Access to Board Processes

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The National Labor Relations Board recently struck down two arbitration provisions that the Board concluded restricted employee access to the agency.

In Cedars-Sinai Medical Center, the Board held that the Hospital’s arbitration clause would reasonably be read by employees to make arbitration the exclusive forum for the resolution of statutory claims, including those arising under the National Labor Relations Act (NLRA). The Board previously held such restrictions to violate Section 8(a)(1) of the NLRA in Prime Healthcare Paradise Valley (discussed in our recent blog post). In the present case, the employer contended the agreement specifically excluded from the arbitration mandate claims “preempted by federal labor laws,” and argued that this savings clause rendered the agreement lawful. The Board disagreed and adopted the principle that vague savings clauses requiring employees to “meticulously determine the state of the law,” as did this savings clause, were not sufficient to make lawful an otherwise unlawful provision. The Board concluded that the objective reasonable employee would not understand this savings clause to exclude claims under the NLRA. Accordingly, the agreement restricted employee access to the Board, and the Board found that such a restriction cannot be supported by any business justification.

In Beena Beauty Holding, Inc., the employer maintained an arbitration agreement providing that “the company and [employees] agree…to submit any claims that either has against the other to final and binding arbitration.” As in Prime Healthcare, the Board found that this rule, when reasonably interpreted, interferes with employee access to the Board. The Board noted that the agreement contained no exception for filing charges with the Board or administrative agencies, generally. Thus, taken as a whole, the agreement makes arbitration the exclusive forum for resolution of claims arising under the NLRA, which the Board has consistently found to be unlawful.

The takeaway here is simple: if your company maintains an arbitration agreement, provide an explicit exclusion in the agreement establishing that employees are not prohibited from accessing the Board to resolve claims under the NLRA.