NLRB Serves Up Guidance for Restaurants on Mandatory Arbitration Agreements in Post-Epic Systems Era

The National Labor Relations Board (NLRB) recently provided guidance in Cordúa Restaurants, Inc., 368 NLRB No. 43, for employers seeking to require employees to sign class action and collective action waivers in arbitration agreements when facing litigation. By way of background, the U.S. Supreme Court previously held in Epic Systems Corp. v. Lewis, 138 S.Ct. 1612 (2018), that agreements containing class action and collective action waivers, and provisions stipulating that employment disputes be resolved by individualized arbitration, do not violate the National Labor Relations Act. As a result, the Court held that these agreements must be enforced as written to follow the Federal Arbitration Act (the "Act"). In Cordúa Restaurants, the NLRB was faced with two issues of first impression in the post-Epic Systems era: (1) whether the Act prohibits employers from circulating such agreements in response to employees opting in to a collective action; and (2) whether the Act prohibits employers from threatening to discharge an employee who refuses to sign a mandatory arbitration agreement. The NLRB held that both actions were consistent with Epic Systems and were not forbidden under the Act. The Cordúa Restaurants decision provides significant opportunity for employers to revise arbitration agreements to preclude participation in these multi-party litigations and require that employees sign these agreements.

On the first issue, the NLRB noted that the Epic Systems decision held that an agreement requiring that employment-related claims be resolved though individual arbitration, rather than through class or collective litigation, does not restrict employees' Section 7 rights to engage in concerted activity. The NLRB stated that opting in to a collective action is merely a procedural step required in order to participate as a plaintiff in a collective action. As such, it reasoned that an arbitration agreement that prohibits employees from opting in to a collective action does not restrict the exercise of Section 7 rights and, accordingly, does not violate the Act. Acknowledging the revised agreement at issue did require employees to agree not to opt in to a collective action, the NLRB held that the effect of that prohibition was simply to require employees to resolve their employment-related claims through individual arbitration rather than through collective actions.

Turning to the second issue, the NLRB held that requiring employees to sign the revised arbitration agreement did not violate the Act. Noting that Epic Systems permits an employer to condition employment on employees entering into an arbitration agreement that contains a class action or collective action waiver, the NLRB examined the statements made by the employees' supervisor, who explained that employees would be removed from the schedule if they declined to sign the revised agreement. The NLRB held these statements did not constitute unlawful threats with reprisals, and instead amounted to an explanation of the lawful consequences of failing to sign the agreement and were an expression of the view that it would be preferable not to be removed from the schedule.

Employers facing class action or collective action litigation should revise arbitration agreements to preclude participation in these multi-party litigations and require employees sign these agreements. That is not to say that all employers can or should undertake these efforts, as employers must consider the risks and costs associated with individual arbitrations.