NLRB rules Employers Can Revise Arbitration Agreements in Response to Wage Claims

Post Authored by Yara Mroueh

The National Labor Relations Board has significantly shifted labor law with its August 14, 2019 decision in Cordúa Restaurants, Inc., which held that an employer may create a mandatory arbitration policy in response to employees who have joined a collective or class action under federal or state wage and hour laws. 368 NLRB No. 43 (Aug. 14, 2019). Additionally, an employer may inform employees that failing or refusing to sign a mandatory arbitration agreement will result in their discharge. Id. In a significant win for employers, the NLRB found, in part, that employers do not violate the National Labor Relations Act when they update their mandatory arbitration agreements in response to workers presently participating in wage and hour class or collective actions under either the Fair Labor Standard Act or state laws. It also held that the National Labor Relations Act allows employers to legally warn workers that their failure to sign these mandatory arbitration policies may result in termination.

This significant ruling comes from a case which accused Cordúa Restaurants of violating the NLRA by firing workers who participated in a collective action alleging various wage violations, including the FLSA and Texas wage and hour laws. The case centered on Cordúa’s response to a hybrid class and collective action filed against it by a former employee and various other workers in 2015. Prior to the lawsuit’s filing, Cordúa had an arbitration agreement barring workers from filing or partaking in a class or collective action against it. Following the filing of the suit, Cordúa informed its current employees they were required to sign a new arbitration agreement. This new agreement included a provision barring employees from opting into a collective action unless the company and the worker agreed in writing that the worker could do so. The company informed its workers that their failure to sign the updated arbitration agreement would result in their termination.

The Cordúa decision is the first to address the lawfulness of employer conduct surrounding mandatory arbitration agreements since the Supreme Court’s 2018 ruling in Epic Systems Corp. v. Lewis, which held that class action waivers in employment arbitration agreements do not violate federal law. 138 S.Ct. 1612 (2018). The Epic Systems ruling gave businesses the power to prevent employees from banding together and filing claims for work-related issues. Instead, each employee must file an individual arbitration claim when a suspected violation arises.

The NLRB has only strengthened an employers’ power and ability to prohibit class action wage and hour claims. However, employees will continue to be protected against retaliation, because the Cordúa Restaurants ruling continues to prohibit employers from taking adverse action against employees when employees work in concert to file a class or collective action. This is consistent with the Board’s long-standing precedent of protecting employees who file class and collective actions concerning wages, hours and working conditions under federal or state laws.

About the Author:

yara.PNGYara Mroueh is an associate attorney at Gordon & Rees, where she focuses her practice primarily in the areas of products and premises liability, insurance defense, toxic tort, and commercial litigation. Yara is active in all phases of litigation, from investigating the facts, settlement negotiations, and pre-trial preparation. As part of her practice, Yara enjoys taking depositions and drafting complex motions in state and federal matters. Yara’s bilingual skills provide her a unique opportunity to connect with clients and achieve the best possible outcome.

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