The National Labor Relations Board recently invalidated an arbitration agreement that would require employees to arbitrate all “all claims or controversies” with their employer, holding that such a provision would unlawfully restrict employees’ access to the Board to adjudicate labor disputes.
The Board’s decision in Prime Healthcare could reverberate widely because the language it declared invalid is particularly common in arbitration agreements.
In the ruling, the Board revisited a topic on which it has previously found itself at odds with the U.S. Supreme Court.
In an earlier ruling, the Board struck down an arbitration agreement on the grounds that it was contrary to the collective rights contained in the National Labor Relations Act to engage in concerted actions with other employees, including engaging in class action litigation. But the Supreme Court overruled this position in Epic Systems v. Lewis and found that employers could lawfully prohibit the use of the class action vehicle in arbitration.
The Epic Systems decision, however, did not eliminate all potential restrictions to arbitration agreements based on the NLRA. While the justices expressly allowed employers to prohibit class actions in arbitration, they did not address the issue of employee access to the Board. Accordingly, employers should not regard Epic Systems as a panacea for NLRA-based challenges to arbitration agreements.
Several factors suggest that the Prime Healthcare decision may have staying power.
First, it was not decided with a partisan split between Board members, as is the standard operating procedure at the NLRB when controversial issues arise. Unlike past decisions on class action in arbitration, Prime was unanimously decided without a dissent from Republican-nominated members.
Second, the Board reviewed the question of Board access using the test expressed in Boeing(generally considered an employer-friendly test) which balances an employer’s legitimate interests against the interests of employees to pursue claims against their employers. The Board in Prime Healthcare rejected any justification for the arbitration agreement that restricted employees, even implicitly, from taking complaints to the NLRB.
Third, and perhaps most importantly, the Prime Healthcare decision is likely to affect boilerplate arbitration agreements in place around the country. The specific language at issue – “all claims or controversies” – is extremely common in arbitration agreements. By finding that this routine, boilerplate language renders an arbitration agreement void, the Board has effectively invalidated scores of arbitration agreements.
Therefore, employers should be aware that this unanimous NLRB decision creates a bright-line rule that prohibits broad employment arbitration agreements that confine “all claims or controversies” to the arbitration process. It would be wise to review the language of all arbitration agreements for compliance with the Prime decision and make sure that these agreements allow employees to access to the NLRB.
Andrew MacDonald is an associate in the firm’s Labor and Employment Department, resident in its Philadelphia office.