Are you aware that as an employer you can violate the National Labor Relations Act (NLRA) whether your employees are unionized or not? A recent case from the Ninth Circuit affirms employers violate the NLRA when policies or agreements prohibit concerted activity. In Morris v. Ernst & Young, LLP, Ernst & Young, an accounting firm, conditioned employment upon signing an arbitration agreement where employees agreed not to join with other employees in bringing legal claims against the company. Specifically, employees were required to (1) pursue legal claims against Ernst & Young exclusively through arbitration, and (2) arbitrate only as individuals and in “separate proceedings.”
Employees Stephen Morris and Kelly McDaniel filed a class action for overtime. Ernst & Young argued Morris and McDaniel should be compelled to individual arbitrations per the agreements they signed as a condition of employment. The court disagreed. It pointed to the well-established principle: employees have the right to pursue work-related legal claims together (concerted activity). It found Ernst & Young’s agreement interfered with a NLRA protected §7 right in violation of §8 and essentially constituted a “concerted action waiver.” The right of employees to pursue legal claims together is a substantive right under §7 and cannot be waived in an arbitration agreement.
The court emphasized agreeing to arbitrate claims is not a per se violation. But, any agreement that limits resolution to a certain mechanism/forum and requires separate individual proceedings, whether it be “through casting lots, coin toss, duel, trial by ordeal, or any other dispute resolution” would be an illegal “separate proceedings” term.
I would not be surprised to see this case appealed to the Supreme Court. Judge Ikuta issued a robust dissent opining the Federal Arbitration Act allows for class arbitration. She holds the NLRA does not invalidate collection action waivers in arbitration agreements.
What should you do in response to this decision? It is a good time to critically review your litigation policies and arbitration agreements. Is there a term that could potentially prohibit employees from bringing “class action” suits? If so, in light of this current decision, it’s time to revise the policies or agreements. If you are unsure whether your agreement/policy could violate §7 of the NLRA, please feel free to contact me: .