NLRB Strikes Arbitration Agreement that Does Not Explicitly Permit Access to the Board
Employers, it is time to revisit your arbitration agreements. On Tuesday, the National Labor Relations Board (“NLRB”) issued a unanimous decision striking an employer’s arbitration agreement on the basis that employees could reasonably construe the arbitration agreement to unlawfully restrict access to the Board and its processes.
Like many employers, Prime Healthcare Paradise Valley, LLC (“Prime Healthcare”) required their employees to sign arbitration agreements as a condition of their employment. The issue presented to the NLRB was that these arbitration agreements were very broadly worded and did not explicitly permit employees from filing charges with the NLRB regardless of the arbitration agreement as required under the National Labor Relations Act (“NLRA”). Rather, the arbitration agreements stated, “all claims or controversies for which a federal or state court would be authorized to grant relief” are subject to arbitration and included examples of such covered claims, including those related to wages, breach of contract, discrimination, and violations of any “federal, state or other governmental constitution, statute, ordinance, regulation or public policy.” Two employees filed unfair labor practice charges alleging the arbitration agreement interfered with their rights under the NLRA.
When analyzing Prime Healthcare’s arbitration agreement, the NLRB used the relatively new Boeing Co. balancing standard, adopted in 2017 at the beginning of the Trump administration and which overruled the previous and more restrictive Lutheran Heritage standard that was used liberally by the NLRB during the Obama administration to strike facially neutral policies. As we previously reported here, the Boeing Co. standard requires the Board to determine whether a rule or policy could potentially interfere with workers’ ability to engage in protected group activity under Section 7 of the NLRA. If the rule or policy could, then employers must prove that “legitimate justifications” for the policy are not outweighed by the potential interference with workers’ rights under section 7 of the NLRA.
In this case, the Board explained that an arbitration agreement which explicitly prohibits the filing of charges with the NLRB or with administrative agencies is obviously unlawful, in that it expressly infringes on an employee’s right to exercise his or her rights under the NLRA. While the Board acknowledged that Prime Healthcare’s arbitration agreement did not explicitly prohibit the filing of charges with the NLRB, the Board nevertheless found that it could reasonably be interpreted to “interfere with the exercise of the right to file charges with the Board.” Prime Healthcare failed to provide legitimate justifications for the broadly worded arbitration agreement and the NLRB explained that, “as a matter of law, there is not and cannot be any legitimate justification for provisions, in an arbitration agreement or otherwise, that restrict employees’ access to the Board or its processes.” As such, the Board ordered Prime Healthcare to rescind the arbitration agreement (which it had already done) and notify their current and former employees who signed the agreement that it was no longer in effect.
COUNSEL TO MANAGEMENT:
Although the Supreme Court and the Board in recent years have treated arbitration agreements favorably and upheld employers’ rights to use and rely on such agreements, there are still limitations on how restrictive they can be, as this decision highlights. Our office anticipated rulings such as this one, and as such, the arbitration agreement that we have developed for use by clients is worded in such a way as to withstand scrutiny from the Board. In these days and times, it is vital that employers have arbitration agreements in place that are enforceable, and regularly updated, so they do not fall trap to legal attacks like the one in this case. If your company is in need of an arbitration agreement, or needs its current agreement reviewed and updated, please contact the experts at The Saqui Law Group, a Division of Dowling Aaron Incorporated.
Sprint Agrees to Pay $4M for Unlawful Deductions
On Thursday, a certified class of 2,290 California Sprint retail workers asked a federal judge to approve a proposed settlement of $4 million regarding allegations that Sprint unlawfully deducted wages from workers’ commissions due to negative customer surveys for the store.
According to the retail workers’ Complaint, between February 2016 and March 2017, Sprint instituted a program that monthly scored each store based on customer surveys that were provided to customers after their interaction with the store. If a Sprint store failed to meet the established monthly target goal, Sprint would take a 10% deduction from all retail workers’ commission at that particular store location, regardless if an individual employee had anything to do with a negative customer survey result.
California law prohibits employers from deducting employees' earned wages, including commissions, and may only lawfully withhold amounts from employees' wages when: (1) required or empowered to do so by state or federal law (such as income tax or garnishments), or (2) expressly authorized in writing by the employee to cover insurance premiums, benefit plan contributions, or other deduction not amounting to a rebate on the employee’s wages, or (3) authorized by a collective bargaining agreement or wage agreement, specifically to cover health and welfare or pension payments. Further, case law has held that conditions placed on earned commissions must relate to the sale that earns the commission and an employer may not require an employee to agree to a wage deduction based on conditions unrelated to the sale and earned commissions.
As a result of Sprint’s survey program, retail workers, Joshua Caudle and Krystle White, filed a class action lawsuit alleging Sprint violated California law when it deducted their wages from their commissions due to negative customer surveys for the store which was unrelated to the sale and earned commission. Retail workers claimed that the survey results were based on factors beyond their control including customer complaints that Sprint had poor cellphone reception which would result in the retail workers not meeting their monthly target goal.
If approved, the proposed settlement will include more than $1.4 million for derivative penalties and $225,000 for California’s Labor and Workforce Development Agency. If none of the retail class member’s opt-out, then each class member is expected to receive at least $1,177, including interest and penalties. Sprint denies any liability from the survey program and stated that the deductions were “simply one factor in calculating employee commissions, rather than a deduction taken from previously ‘earned’ wages."