NLRB’S Continued Invalidation of Class Action Waivers

After about a year of silence on the topic, the National Labor Relations Board (NLRB) has issued yet another decision invalidating a class and collective action arbitration waiver, doubling down on its earlier decisions in In re D.R. Horton, Inc. and Michael Cuda¹ and Murphy Oil, U.S.A, Inc. and Sheila M. Hobson.² In doing so, the NLRB is again seemingly unfazed by the federal courts’ near absolute refusal thus far to follow the NLRB’s decisions invalidating class and collective action waivers in employment arbitration agreements.³

In The Neiman Marcus Group, Inc. and Sheila Monjazeb, Neiman Marcus became the latest company to draw the ire of the NLRB. Employee Sheila Monjazeb was required by Neiman Marcus to sign an employment agreement that contained the following provision:

I understand that if I accept or continue employment with NMG, I will automatically be deemed to have (1) accepted the terms of the mandatory Arbitration Agreement, (2) agreed to arbitrate such disputes, and (3) waived all rights to a judge or jury trial for all such disputes.⁴

Later, on November 23, 2009, Ms. Monjazeb was required to agree to the terms of a class and collective action arbitration waiver, which stated:

Class Action Prohibition. The arbitrator shall not consolidate claims of different employees into one (1) proceeding, nor shall the arbitrator have the authority to consider, certify, or hear an arbitration as a class action. While Section 22 hereof contains a severability clause, this provision that precludes class actions may not be severed from this Agreement for any reason.⁵

The arbitration agreement and accompanying class and collective action arbitration waiver required Neiman Marcus employees to submit any workplace dispute not resolved internally or successfully mediated to arbitration.⁶

On August 10, 2010, Ms. Monjazeb filed a class action wage-and-hour complaint against Neiman Marcus in the Superior Court of the State of California.⁷ Neiman Marcus responded with a motion to compel arbitration, which was granted, and Ms. Monjazeb refiled her claim with the American Arbitration Association (AAA), as a class-action arbitration.⁸ Neiman Marcus’s attorney sent a letter to the AAA stating that, in accordance with its agreement with Ms. Monjazeb, it would not participate in class arbitration.⁹ Ms. Monjazeb responded by seeking to have her class action lawsuit reinstated in state court.¹⁰ After a bit more back-and-forth, the NLRB decided to take up the legality of Neiman Marcus’s class and collective action waiver.¹¹

Keeping in line with its earlier decisions in D.R. Horton and Murphy Oil, the NLRB held Neiman Marcus’s class and collective action waiver to be in violation of federal labor law.¹² In explaining the reasons for the holding, the NLRB stated that “[c]learly, an individual who files a class or collective action regarding wages, hours or working conditions, whether in court or before an arbitrator, seeks to initiate or induce group action and is engaged in conduct protected by Section 7 [of the National Labor Relations Act (NLRA)].”¹³ Section 7 of the NLRA guarantees employees the right to unionize and collectively bargain, which the NLRB has read to also allow employees the right to initiate class and collective action lawsuits.¹⁴

Interestingly, Section 7 also gives employees the right to refrain from collective bargaining.¹⁵ What remains to be seen now is whether that right may ever be exercised through a contractual waiver, and whether such a waiver must be signed completely on an employee’s own volition, or whether an employer may induce the employee to sign a waiver (in a way that, clearly, does not mean the employee’s job).

Is this the death-knell for class and collective action waivers? Likely not. Federal courts have historically either been reluctant to or outright refused to follow earlier NLRB decisions regarding class and collective action waivers in the employment context, and the trend is likely to continue. Because the NLRB is not required to follow federal court decisions, and the same is true in the reverse, this split will not likely be resolved without Supreme Court intervention.  Interestingly, two competing Supreme Court philosophies likely will be on display when such a case finally comes down the pipeline. On the one hand, most recently the Supreme Court has shown itself to be very much in favor of class action waivers that employees have entered into on their own volition. On the other, the Court has also strongly supported Chevron deference where administrative agencies interpret their own statutes. Whichever way the Court holds, it will likely have to backpedal from earlier decisions to do so.

• Albert I. Manca is a complex commercial litigation attorney with Olive Judd, P.A. His practice focuses on complex commercial litigation, including breach of contract defense, shareholder derivative litigation, class action defense, and labor and employment defense.

[1] 357 N.L.R.B. 184 (2012).

[2] 361 N.L.R.B. 72 (2014).

[3] See, e.g., Walthour, et al. v. Chipio Windshield Repair, LLC, et al., 745 F.3d 1326 (11th Cir. 2014).

[4] 362 N.L.R.B. 157 (2015).

[5] Id.

[6] Id.

[7] Id.

[8] Id.

[9] Id.

[10] Id.

[11] Id.

[12] Id.

[13] Id.

[14] Nat’l Labor Relations Act § 7.

[15] Id.