Employee Manuals and Mandatory Arbitration

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Employee Manuals and Mandatory Arbitration

Employee Manuals and Mandatory Arbitration[1]

Recent court and administrative decisions require consideration of modifying employee manuals which incorporate mandatory arbitration of employee disputes. These pronouncements include the following:

1. Class and collective-action waivers in mandatory arbitration agreements do not violate the National Labor Relations Act (NLRA).[2]

2. Employers are not prohibited under the NLRA from informing employees that failing or refusing to sign a mandatory arbitration agreement will result in their discharge.[3]  

3. Employers are not prohibited under the NLRA from promulgating mandatory arbitration agreements in response to employees opting in to a collective action under the Fair Labor Standards Act or state wage-and-hour laws. Id.

4. A cursory review of sundry state law judicial decisions reflect employment related mandatory arbitration has been held unenforceable under the following circumstances:

          4.1 It was included within a lengthy employee handbook.[4] [This objection may be cured by carving out the arbitration agreement from the manual and requiring a separate employee signature for it].

          4.2. The handbook stated that it was not intended to create a contract; the handbook provided that it could be amended unilaterally by the employer and thus rendered the mandatory arbitration agreement illusory; Id.

          4.3. The specific rules referred to in the arbitration clause (AAA[5] and FAA[6]) were not provided to the employee supporting a finding of procedural unconscionability; Id. [This objection may be cured by publishing the AAA [or other arbitration forum] and FAA rules on the employee website and referencing their location in the arbitration agreement].

          4.4 The arbitration provisions make no express provision for discovery rights. Id. [The AAA Arbitration Rules and Mediation Procedures[7] provide for discovery if the arbitrator deems it necessary. By publishing the AAA rules on the employee website this may cure this objection].

          4.5 The arbitration provisions did not refer to plaintiff’s statutory rights[8],[9]. Some statutory rights, e.g., under FLSA are listed on the posters the employer is required to provide.[10]

          4.6 The arbitration provisions did not explain the nature of an arbitration proceeding; Id.  [ If the employer provides a copy of the AAA arbitration rules on its employee website, this provision may resolve the objection].

          4.7 The arbitration provisions did not state that plaintiff was relinquishing his constitutional right to seek redress in a court of law before a judge and a jury.[11]  

          4.8 The agreement explained nothing about the arbitration clause; did not attach or explain the arbitration rules; and the clause required the plaintiff to waive punitive damages. The court found plaintiff was not provided with any information by which he could reasonably estimate the cost of arbitration. Additionally, the 33 pages of arbitration rules had to at least be presented with the agreement since the number and complexity of the rules could cause a potential [employee] to ask questions or seek advice.[12]

5. According to several sources, It is a best practice for employers to have stand-alone agreements with employees to address significant issues such as arbitration clauses, confidentiality, email/internet policies etc., when the employer also wants to maintain the at will status for employees and ensure that the handbook does not create a contract in other respects. See, e.g, https://www.natlawreview.com/article/employers-beware-relying-handbooks-to-create-enforceable-arbitration-or-other.

6. Enforcement of an arbitration agreement is governed by state law contract principles applicable to ordinary contracts. These principles uniformly require an offer, acceptance and consideration.

There must be a showing of contractual assent to uphold an arbitration agreement. Continued employment may constitute acceptance where the employer’s document clearly states that continued employment constitutes acceptance, and the employer informs all employees that continued employment constitutes acceptance.  Mere review of the subject materials does not constitute an acceptance by the employee. Without an acceptance, no contract was formed as to the delegation provision. An acknowledgment of a review of offered terms alone does not evince an intent to accept those terms.[13] Employers should review their handbooks and arbitration agreements to help ensure they can withstand attacks like that presented in PrimeLending.[14]

7. Following up on the NLRB’s decision in The Boeing Company[15], on June 6, 2018 NLRB General Counsel issued a new Guidance Memorandum (18-04)[16] detailing how NLRB Regional Offices receiving claims of improper employment policies are to interpret employer workplace rules. Employee manuals should be reviewed by counsel to determine whether they take advantage of the permitted category rules or run afoul of the prohibited category rules of the Guidance Memorandum.

[1] This blog is designed for general information only. The information presented at this site should not be construed to be formal legal advice or the formation of a lawyer/client relationship. The author of this blog is not certified by any state agencies or boards of legal specialization. This blog may constitute attorney advertising in some jurisdictions.

Copyright 2019 Fred L. Somers, Jr., P.C.               Atlanta, GA 30338

[2] Epic Systems v. Lewis, 138 S. Ct. 1612 (2018).

[3] Cordúa Restaurants, Inc., 368 NLRB No. 43 (2019).

[4] Sparks v. Vista Del Mar Child and Family Services 207 Cal.App.4th 1511(2012)

[5] American Arbitration Association

[6] Federal Arbitration Act

[7] See https://www.adr.org/sites/default/files/EmploymentRules_Web2119.pdf

[8] C.M. v. Maiden Re Insurance Services; https://law.justia.com/cases/new-jersey/appellate-division-unpublished/2015/a2913-13.html

[9] For example, Georgia law requires an employer give employees up to two hours off to vote in any election for which the employee is registered and qualified. This law is not applicable if the employee commences work more than two hours after the polls open or leaves work more than two hours before the polls close. An employer may specify the particular hours that an employee can be absent.  O.C.G.A. § 21-2-404.

[10] The posters required depend upon whether the employer is a “covered” employer under the applicable statute, federal or state. For example, FLSA applies only to employers whose annual sales total $500,000 or more or who are engaged in interstate commerce. Most all employers may be held to engage in interstate commerce.

[11] See f.n. 8.

[12] See Delaney v. Dickey, N.J. Super. App. Div. (per curiam) Case No. 04-2-2422.

[13] Shockley v. PrimeLending, Case No. 18-1235 (8th Cir 2019).

[14] See https://www.littler.com/publication-press/publication/your-arbitration-agreement-employee-handbook-eighth-circuit-issues.

[15] 365 NLRB No. 154 (Dec. 14, 2017)

16 See https://www.nlrb.gov/news-publications/nlrb-memoranda/general-counsel-memos