Another Strike Against the NLRB’s Fight to End Arbitration Clauses

Stop us if you’ve heard this one before…

That’s not the lead-in to a tired joke, but rather our introduction to the latest chapter in the National Labor Relations Board’s ongoing efforts to block employer-mandated arbitration clauses in labor contracts (for earlier updates, see Mandatory Arbitration Agreements Are Dead! Long Live Mandatory Arbitration Agreements!).

The most recent ruling comes from the California Court of Appeal, which found in Lorena Nelsen v. Legacy Partners Residential that class action waivers in arbitration agreements are indeed lawful. From law firm Proskauer:

“After Plaintiff Lorena Nelsen filed a putative class action against her former employer, Legacy Partners Residential, Inc. (‘LPR’), alleging various violations of the California Labor Code, LPR moved to compel Nelsen to submit her individual claims to arbitration based on an arbitration agreement Nelsen signed when she joined LPR. Nelsen appealed the trial court’s decision granting LPR’s motion. The Court of Appeal affirmed the trial court’s decision.”

More importantly, the Court held that the NLRB went too far when it said that mandatory arbitration agreements violate Section 7 of the National Labor Relations Act. Law firm Bryan Cave:

“The California Appellate Court … criticiz[ed] the Board for pushing well beyond the boundaries of its authority and concluding that [the Court] was under no obligation to follow the Board’s decision.”

The NLRB-bashing didn’t stop there, however. Again, Proskauer:

“The Court noted that the Horton decision was subscribed to by only two NLRB Board members and the subject matter of the decision fell well outside the Board’s core expertise. The Court also noted that the NLRB’s decision in Horton reflected a novel interpretation of the law and cited no prior legislative expression, or judicial or administrative precedent.”

Not a good day for the NLRB. But what does the ruling mean for California employers? Again, Bryan Cave:

“Employers who previously chose not to use arbitration agreements because of doubts over their enforceability should revisit whether an arbitration agreement might provide an effective tool in managing employment disputes.

Employers using arbitration agreements should have them reviewed periodically to make sure they take into consideration current court decisions regarding unconscionability and enforceability. Employers using such agreements should also consider including a clause barring class action arbitrations. Such waivers can force employees to submit their individual claims to an arbitrator and bar arbitrators from making class certification decisions that will be subject to very limited judicial review.”


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