Arbitration

It’s Never Too Late: NLRB Rules Employers Can Update an Existing Mandatory Arbitration Agreement to Include a Class or Collective Action Waiver After Being Sued, and Can Warn Workers that Failure to Sign Will Result in Termination

Arbitration agreements are a powerful tool in resolving employment actions.  As we noted last year, the U.S. Supreme Court ruled in a landmark case that employers can use class and collective action waivers in mandatory arbitration agreements.  The U.S. Supreme Court’s 5-4 decision in Epic Systems Corp. v. Lewis, No. 160285 (U.S. May 21, 2018), was authored by Justice Gorsuch, and settled the longstanding dispute over whether arbitration agreements containing class waivers are enforceable under the Federal Arbitration Act (FAA) despite the provisions of Section 7 of the National Labor Relations Act (the Act).

On August 14, 2019, the National Labor Relations Board (NLRB) issued Cordúa Restaurants, Inc., 368 NLRB No. 43 (2019), in which the NLRB sided with employers on two key arbitration questions following the Epic decision.  First, the NLRB found that an employer that is sued in a class or collective action can update its existing mandatory arbitration agreement to include a class or collective action waiver, barring workers from opting in to the pending litigation.  What’s more, the NLRB found that employers can warn workers that failure to sign the updated arbitration agreement will result in termination.

Employers can update an existing mandatory arbitration agreement to include a class or collective action waiver, even after workers have opted in to the collective action:

The NLRB first addressed the issue of “whether the Act prohibits employers from promulgating [mandatory arbitration] agreements in response to employees opting in to a collective action.”  In Cordúa Restaurants, Inc., Cordúa Restaurants had an existing mandatory arbitration agreement that required employees to waive their “right to file, participate or proceed in class or collective actions (including a Fair Labor Standards Act (‘FLSA’) collective action) in any civil court or arbitration proceeding,” but did not expressly prohibit opting in to collective actions.  Seven employees filed a collective action in the United States District Court for the Southern District of Texas alleging violations of the FLSA and the Texas Minimum Wage Act.  After thirteen employees opted in to the collective action, Cordúa Restaurants updated their existing mandatory arbitration agreement to expressly require employees to agree not to opt in to collective actions.  Although the NLRB, for purposes of the decision, assumed that opting in to a collective action constitutes protected concerted activity under Section 7 of the Act, it still found that promulgating the updated mandatory arbitration agreement in response to the opt-ins did not violate the Act.  The Board reasoned that Epic made clear that an agreement requiring that employment-related claims be resolved through individual arbitration, instead of class or collective action, does not restrict Section 7 rights in any way.

Employers can warn workers that failure to sign the updated arbitration agreement will result in termination:

The NLRB next tackled the issue of “whether the Act prohibits employers from threatening to discharge an employee who refuses to sign a mandatory arbitration agreement.”  After updating the mandatory arbitration agreement to include the above provision against opting in to collective actions, Cordúa Restaurants needed to distribute and execute these updated agreements.  During a pre-shift meeting, an assistant manager distributed the updated agreement to employees and explained that employees would be removed from the schedule if they declined to sign it.  After a couple employees objected to signing the updated agreement, the assistant manager stated that he “wouldn’t bite the hand that feeds [him]” and that he would instead “go ahead and sign it.”  The NLRB reasoned that because Epic permits employers to condition employment on employees entering into an arbitration agreement that contains a class or collective action waiver, the assistant manager did not unlawfully threaten the employees.

Dissent:

The majority opinion was authored by Chairman John F. Ring, Member Marvin E. Kaplan, and Member William J. Emanuel.  Member Lauren McFerran authored a separate dissent, which disagreed with the majority on both issues and found that, “[t]he record here establishes that [Cordúa Restaurants] violated Section 8(a)(1) [of the Act] by imposing the revised arbitration agreement on employees, in response to their protected concerted activity and by threatening employees for protesting the revised agreement.”  Member McFerran reasoned that although Epic blessed the use of mandatory arbitration agreements with class or collective action waivers, promulgating a lawful rule or policy in response to protected concerted activity is prohibited under Board law.  Lastly, Member McFerran found that the employees exercised their Section 7 rights by protesting the updated agreement and the assistant manager unlawfully threatened them.

Takeaways:

In its news release, the NLRB recognized that Cordúa Restaurants, Inc. is its first decision concerning the lawfulness of employer conduct surrounding mandatory arbitration agreements since Epic.  It remains to be seen how state or district courts analyze a fact pattern such as this one, but this is a very encouraging development for employers if this is a sign of what’s to come from the NLRB.  The decision strengthens employers’ power to effectuate mandatory arbitration agreements—now before and during pending litigation.

Phase Two of New York Legislative Response to #MeToo: State Passes Comprehensive Anti-Discrimination Expansion Bill

Major changes are in store for New York employers under a new bill passed in the waning hours of the 2019 legislative session. As part of an ongoing, multi-year effort to address sexual harassment and other discrimination and harassment issues, the New York legislature on June 19, 2019 passed Assembly Bill 8421 (“AB 8421”), a compendium bill that introduces new and refined employee protections against harassment, retaliation, and discrimination in the workplace. AB 8421 amends the New York State Human Rights Law (“NYSHRL”) to usher in new affirmative protections and procedural mandates that will significantly affect employer liability under state law. Building on protections previously enacted under the 2018 state budget, AB 8421 will expand prohibitions on nondisclosure agreements and arbitration agreements to categories of discrimination and harassment beyond sexual harassment. Key elements of AB 8421 are described below. READ MORE

#MeToo One Year Later – Employers’ Responses to the Movement

On October 15, 2017, the #MeToo movement began in earnest following a tweet by actress Alyssa Milano. To commemorate the one-year anniversary of the #MeToo movement, the Orrick Employment Law and Litigation Blog will analyze the effects of the movement from the employment perspective. Part 1 reviewed the movement’s impact on sexual harassment claims in the workplace, Part 2 focused on the legislative reaction to the movement, and Part 3 below discusses how employers have responded to #MeToo.

Over the past year, the #MeToo movement has caused a seismic shift in our culture that continues to ripple through important aspects of our daily lives, especially the workplace. As we previously discussed, the #MeToo movement’s growing momentum has sparked rising trends in sexual harassment claims and lawsuits, as well as a significant increase in EEOC charges and enforcement efforts. In the past year, the EEOC revealed that it filed 41 lawsuits with sexual harassment allegations, which is a 50 percent increase from 2017. In addition, litigation and administrative enforcement of sexual harassment issues yielded nearly $70 million to the EEOC in 2018, up from $47.5 million the prior year. But newly filed lawsuits or administrative charges only reveal a part of the impact – claims of sexual harassment may have a devastating effect on those accused of wrongdoing and their employers, even if they lie far beyond any applicable statute of limitations, as today’s claims often do. Employers of all shapes and sizes are acclimating their policies and practices for the #MeToo era, as none can avoid the categorical shift in workplace culture that is slowly becoming the “new normal.” READ MORE

#MeToo One Year Later: The Legislative Reaction

On October 15, 2017, the #MeToo movement began in earnest following a tweet by actress Alyssa Milano. To commemorate the one-year anniversary of the #MeToo movement, the Orrick Employment Law and Litigation Blog will analyze the effects of the movement from the employment perspective. Part 1 reviewed the movement’s impact on sexual harassment claims in the workplace, Part 2 below focuses on the legislative reaction to the movement, and Part 3 discusses how employers have responded to #MeToo. READ MORE

Maryland Says “Me Too” with Arbitration Limits and New Reporting Requirements

On May 15, 2018, Maryland Governor Lawrence J. Hogan signed into law H.B. 1596, the Disclosing Sexual Harassment in the Workplace Act of 2018 (the “Act”), expanding employee rights and remedies under state sexual harassment law and impacting Maryland employers in two ways. READ MORE

Epic News for Employers: Class Action Waivers in Arbitration Agreements are Enforceable

Employers across the country started the work week with some positive and long-awaited news.  On Monday, May 21, 2018, the U.S. Supreme Court ruled in a landmark case that employment arbitration agreements with class action waivers do not violate federal labor law.  The Court’s 5-4 decision in Epic Systems Corp. v. Lewis, No. 160285 (U.S. May 21, 2018), consolidated with Ernst & Young LLP et al v. Morris et al., No. 16-300, and National Labor Relations Board v. Murphy Oil USA, Inc., et al. , No. 16-307, was authored by Justice Gorsuch, and settles the longstanding dispute over whether arbitration agreements containing class waivers are enforceable under the Federal Arbitration Act (FAA) despite the provisions of Section 7 of the National Labor Relations Act (NLRA).   READ MORE

Don’t Stand So Close to Me: Ten California Sexual Harassment Bills to Watch

In tandem with the growing #MeToo movement, sexual harassment appears to be top of mind for California legislators in 2018. In the wake of Harvey Weinstein, Bill Cosby and the like, California has been flooded with an unprecedented number of bills aimed at combatting sexual harassment.  The 20+ pending bills take on topics ranging from confidentiality provisions to increased mandatory harassment training.  Now more than ever, employers must pay heed to how sexual harassment issues are handled at their companies. Here are the highlights from the top 10 bills that – if passed – will most likely impact employers:

Senate Bill 820 would prohibit settlement agreement provisions that prevent the disclosure of facts related to claims of sexual assault, sexual harassment or sex discrimination cases. Otherwise known as the STAND (Stand Together Against Non-Disclosures) Act, the bill would apply to agreements entered into after January 1, 2019 and would create an exception where a complainant requests a nondisclosure provision (unless the defendant is a government agency or public official, in which case the exception would not be available). The STAND Act passed the Senate Judiciary Committee on May 1, 2018 with a vote of 5-1, and is now headed to a full vote in the Senate. Assembly Bill 3057 contains similar prohibitions, and is currently in the Assembly Appropriations Committee. READ MORE

#MeToo—New York Poised to Ban Non-Disclosure and Arbitration of Sexual Harassment Claims

On March 30, 2018, the New York State Assembly completed passage of the 2018-19 state budget.  Undoubtedly spurred by the #MeToo movement, the final budget measure, which is expected to be signed into law by Governor Andrew Cuomo, includes a bill (S. 7507–C/ A. 9507–C), containing several measures aimed at creating safer workplaces free of sexual harassment and abuse.  READ MORE

Legislators Quick to Respond to #Metoo

Introduction

Since Anita Hill’s testimony in the early 1990s, sexual harassment has become a familiar term. At the federal level, Title VII prohibits harassment, discrimination, and retaliation on the basis of sex and gender, among other things. On the state level, the New York State Human Rights Law (“NYSHRL”) expands on the categories of protected classes covered by Title VII but is interpreted by the courts in largely the same manner as Title VII. Under California’s Fair Employment and Housing Act (“FEHA”), harassment is defined to include verbal harassment (such as derogatory comments), physical harassment (including physical interference with movement), visual harassment (such as derogatory cartoon or drawings), and sexual favors. FEHA prohibits sexual harassment because of a person’s sex, gender, gender identity, gender expression, sexual orientation, transgender status, pregnancy, and childbirth, breastfeeding, and related medical conditions. Harassment based on the perception of any of these characteristics is also prohibited, and sexually harassing conduct need not be motivated by sexual desire to be considered unlawful. READ MORE

The Ending Forced Arbitration of Sexual Harassment Act: A Legislative Response to #MeToo

With sexual misconduct allegations sending shockwaves everywhere from Hollywood to Washington, it should come as no surprise that some legislators are chomping at the bit to pass legislation addressing sexual harassment in the workplace. On December 6, a group of lawmakers introduced legislation that would eliminate forced arbitration clauses in employment agreements. Representatives Cheri Bustos (D-Ill), Walter Jones (R-N.C.) and Elise Stefanik (R-N.Y.) and Senators Kirsten Gillibrand (D-N.Y.), Kamala Harris (D-Calif.) and Lindsey Graham (R-S.C.) are sponsoring the “Ending Forced Arbitration of Sexual Harassment Act,” which proponents say will prevent women from being silenced through mandatory arbitration agreements. READ MORE