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WBK Industry News - Litigation Developments

11th Circuit Enforces Individualized Arbitration in Employment Agreements

The U.S. Circuit Court of Appeals for the Eleventh Circuit recently applied the Supreme Court’s decision in Epic Systems v. Lewis – in which the Supreme Court held that employers can enforce arbitration agreements that provide for waiver of class action rights over employment-related disputes – and reversed in part and remanded in part the National Labor Relations Board (NLRB) panel’s orders in Cowabunga, Inc. v. NLRB and Everglades College, Inc. v. NLRB.

In both cases, the three-member panel of the NLRB concluded that each employer violated the National Labor Relations Act (NLRA) by enforcing an employment agreement that required employees to individually arbitrate employee-related claims and waive class or collective action lawsuits.

In Cowabunga, an employee filed a collective action under the Fair Labor Standards Act (FLSA) against his employer.  In response, his employer filed a motion to dismiss, or in the alternative, to stay and compel arbitration based on the employee’s individualized arbitration clause.  This case ultimately led to collective arbitration, but the day before the employee dismissed his FLSA lawsuit, he filed an unfair labor charge with the NLRB claiming the arbitration clause violated the NLRA by: (1) prohibiting employees from filing collective action lawsuits; and (2) causing employees to reasonably believe they were prohibited from filing unfair labor charges with the NLRB.

In Everglades College, Inc., the employer required all employees to complete a re-boarding process which included signing a new arbitration agreement.  The arbitration agreement required that all employment disputes be resolved exclusively through individualized arbitration.  When the employee refused to sign the arbitration agreement by the deadline, the employee was discharged.  The employee filed an unfair labor charge with the NLRB.  In this case the employee claimed similar violations of the NLRA as mentioned above.  In addition, she claimed the employer violated the NLRA by discharging her for failing to sign the arbitration agreement.

In both cases, the 11th Circuit applied Epic Systems and reversed the panel’s decision that the employer violated the NLRA by maintaining and enforcing an employment agreement requiring that all employment disputes be resolved through individualized arbitration.  In Epic Systems, the Supreme Court held that employer-employee agreements – which contain class and collective action waivers requiring employment disputes be resolved by individualized arbitration – do not violate the NLRA.  The Supreme Court explained that the agreements must be enforced as written pursuant to the Federal Arbitration Act.

Finally, the 11th Circuit remanded the NLRB panel’s ruling that the arbitration agreement caused employees to reasonably believe they were prohibited from filing unfair labor charges with the NLRB because the NLRB refashioned its test for determining whether an employer’s allegedly facially neutral policy, such as the arbitration provision, would reasonably lead an employee to believe the he could not file an unfair labor charge with the NLRB.

Cowabunga, Inc. v. NLRB can be found here, and Everglades College, Inc. v. NLRB can be found here.