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Employer Forced to Rescind its Employee Arbitration Agreements

hands-1063442_1920e.jpgBrandon Grysko, Esq.

The National Labor Relations Board (NLRB) recently forced an employer to rescind arbitration agreements with numerous past and current employees. The NLRB is the administrative decision-making body charged with enforcing the National Labor Relations Act (NLRA), a labor law that protects employees who ban together to improve the terms and conditions of their employment.

Under NLRB guidance, employers cannot generally enact any policy or make any rule that would interfere with employees' rights under the NLRA. The NLRB recently applied this rule in the Prime Healthcare decision. In that case, the employer, Prime Healthcare, had a standard arbitration agreement with its employees. The agreement contained broad language that all claims or controversies had to be brought in arbitration. There were only limited exceptions for claims like workers compensation or unemployment.

The NLRB evaluated the agreement using a two-step process: (1) When reasonably interpreted, could the agreement potentially interfere with NLRA-protected rights? (2) What is the potential impact on employees versus the legitimate justifications of the employer?

The broad language contained in the arbitration agreement could be reasonably interpreted to require NLRA violations to be resolved in arbitration, rather than through the administrative process. The Board went on to determine that there was no legitimate justification along with a significant risk that employees' rights would be impaired.

Therefore, the NLRB ordered the employer to rescind the agreement and to notify all past and current employees that the arbitration provision was no longer in effect. A carefully worded arbitration agreement could have avoided this whole situation.

This serves as a reminder to employers to have their employment contracts, arbitration agreements, and employee handbooks periodically reviewed by a labor and employment attorney to ensure that those documents don't run afoul of federal labor relations laws.

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