Seyfarth Synopsis: A new decision reinforces that the National Labor Relations Board will invalidate arbitration agreements that explicitly, or when reasonably interpreted, prohibit filing administrative charges.

By Samuel Rubinstein[1] and Howard M. Wexler

In June 2018, the Supreme Court held in Epic Systems that employers may require employees, as a condition of employment, to enter into arbitration agreements that contain waivers of the ability to participate in a class or collective action under various employment statutes.

In June 2019, the National Labor Relations Board held in Prime Healthcare Paradise Valley, LLC that even after Epic Systems, it is unlawful to enforce arbitration agreements that interfere with the employees’ right to file charges with the Board.  The Board in Prime Healthcare analyzed whether the arbitration agreement explicitly, or if reasonably interpreted, prohibits charge filing with the Board.  If so, the agreement violates the National Labor Relations Act.

The Board recently had another opportunity to revisit the issue of mandatory arbitration agreements in Beena Beauty, 31-CA-144492.

In Beena, the relevant language of the mandatory arbitration agreement stated: “THE COMPANY AND [EMPLOYEES] AGREE…TO SUBMIT ANY CLAIMS THAT EITHER HAS AGAINST THE OTHER TO FINAL AND BINDING ARBITRATION.”  The Agreement only excluded “[c]laims for workers compensation or unemployment compensation benefits.”

The Decision

The Board began its analysis by noting that the agreement does not explicitly prohibit filing administrative charges.  However, the Board still scrutinized the agreement as a whole.  In doing so, the Board noted that the agreement contained no exceptions for charge filing with the Board or other administrative agencies.  Furthermore, the Agreement specifically excluded workers compensation and unemployment compensation benefit claims.

Applying those principles, the Board found that the only reasonable interpretation of the agreement is that except for workers compensation and unemployment benefits, arbitration was “the exclusive forum for the resolution of all claims.”  Therefore, the agreement prohibits the filing of charges and it therefore violated the National Labor Relations Act.

The Remedy

After finding that the current agreement was unlawful, the Board ordered the employer to rescind the agreement or “revise it in all its forms to make clear to employees that the Agreement does not bar or restrict employees’ right to file charges with the National Labor Relations Board.”  In addition, the employer was ordered to notify current and former employees that the agreement has been rescinded and provide revised copies if applicable.

What Does Beena Beauty Mean for Employers?

The decision is an important reminder that the Board will still scrutinize arbitration agreements.  In this light, it reminds employers to review their current agreements to make sure that they contain exceptions for charge filing with administrative agencies generally.

[1] Mr. Rubinstein is a Senior Fellow.