Last week, the National Labor Relations Board (NLRB) ruled that it is illegal for employers to require their workers to sign mandatory arbitration agreements that prevent them from joining together to file class-action employment-related lawsuits. According to Alex Colvin of Cornell University School for Industrial and Labor Relations, 25 percentof nonunion employees are currently forced to sign mandatory arbitration agreements as a condition of employment that prevents them from filing class-action lawsuits.
The NLRB ruled that mandatory arbitration agreements preventing joint action were illegal in a case involving a group of nonunion construction workers who claimed they were misclassified as superintendents in an effort by the contractor to deny the workers overtime pay. (Workers classifed as superintendents are exempt from The Fair Labor Standards Act, which establishes a minimum wage and overtime pay, among other things.) Because of a mandatory arbitration clause in their contracts, the workers had been barred from suing the contractor as a part of a class action over lost pay.
Often times, it can be very expensive for workers to bring an arbitration case or a lawsuit against an employer since their claims are rarely more than a few thousand dollars and the lawyer fees that most attorneys would collect would not be sufficient to pay for the amount of time they invested in litigating these cases. Thus, class action lawsuits are much more appealing for lawyers to file against companies on charges like wage theft because the collective fee they can collect on behalf of their clients whose claims are relatively small is at least adequate.
The NLRB, which enforces labor laws, ruled that the right of employees—whether in a union or not—to join collectively together to take action against their employees was a concerted activity protected by the NLRA.
“The board has long held, with uniform judicial approval, that the NLRA protects employees' ability to join together to pursue workplace grievances, including through litigation,” the NLRB’s ruling stated.
The Chamber of Commerce and other groups argued against the board’s decision in an amicus brief. The Chamber argued that a Supreme Court decision issued last April in a case involving AT&T Mobility says that a business could force consumers to sign mandatory arbitration agreements that forbid class action lawsuits as part of contracts citing the Federal Arbitration Act.
In its ruling, the NLRB argued that the Federal Arbitration Act does not trump the National Labor Relations Act when it comes to matters of workers’ rights to act collectively. The ruling is likely to be appealed by business groups. The outcome of such a showdown w have far-reaching implications on the NLRA's ability to protect workers' collective efforts to protect their interests.