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.

As we previously reported, in conjunction with Chris Schulte of CJ Lake, LLC and Rob Roy of Ventura County Agricultural Association, the Social Security Administration (“SSA”) began mailing Educational Correspondence (“EDCOR”) notifications to employers who submit at least one 2018 W-2 with a SSN mismatch or no-match. These notices differed from previous mismatch/no-match letters as they did not include names or SSNs. Instead, employers were only notified that they submitted W-2s with mismatched SSNs and the raw number of W-2 forms the employer submitted that do not match.

 Dynamex “ABC” Independent Contractor Test Applies Retroactively

On Thursday, the Ninth Circuit ruled that Dynamex Operation West, Inc., v. Superior Court., (“Dynamex”) the California Supreme Court landmark decision which made it significantly more difficult for employers to classify workers as independent contractor, applies retroactively.

As we previously reported here, in May of 2018 the California Supreme Court abandoned its previous multi-factor independent contractor standard that required a worker to demonstrate an employer had sufficient control to find that there is an employee-employer relationship. Rather, the California Supreme Court now embraces a standard that presumes all workers are employees instead of independent contractors, and places the burden on the employer classifying an individual as an independent contractor to establish that such classification is proper under the “ABC” test. As such, an employer now bears the burden that a worker satisfies all 3 factors of the “ABC” test in order to be properly classified as an independent contractor: A) the individual is free from the employer’s control and direction; B) the individual performs work that is outside the usual course of the employer’s business; and C) the individual has an independently established trade, occupation, or business.

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After many years of litigation, employer Lamps Plus successfully defended its arbitration agreement all the way to the U.S. Supreme Court (“SCOTUS”), when the Court’s conservative majority ruled that a court may not compel class-arbitration unless the parties’ arbitration agreement shows that the parties agreed to that process.

In the case at issue, Varela v. Lamps Plus an employee sued its employer, Lamps Plus, over a data breach issue where 1,300 employees’ tax information was released by a hacker. The employee sued on behalf of himself and other employees whose information was released. The employer sought to enforce its arbitration agreement with employee, arguing that the case should be compelled to individual arbitration—meaning that the employee could arbitrate his claim only. The District Court compelled the claim to arbitration, but authorized the employee to pursue the claims as a class representative—meaning that the case would proceed as a class-action in arbitration. The employer appealed, saying that the employee could not pursue a class claim in arbitration, and that only the employee’s individual claim should be pursued. The issue was heard by the Ninth Circuit, who agreed again with the employee that class treatment in arbitration was appropriate because the arbitration agreement was ambiguous on the issue of class arbitration.

Arbitration Agreement Held Valid Despite Employee’s Rejection

On Wednesday, a three judge panel for the Second Appellate District provided a win for employers, ruling that although an employee would not sign an employer’s arbitration agreement, the employee is still bound by the arbitration agreement because the employer declared upfront that the arbitration agreement was a mandatory condition of continued employment.

On December 2, 2016, Sohnen Enterprises (“the Company”) notified it’s at-will employees at a staff meeting that it was adopting an arbitration policy to resolve employment-related disputes. At this staff meeting, the Company’s Chief Operating Office informed Plaintiff Erika Diaz (“Diaz”) and other employees that by continuing to work, the Company would take it as an acceptance of the arbitration agreement regardless if the employee signed the written version. At the meeting, Diaz refused to sign the agreement and made it clear that she did not want to accept the terms. The Company had private follow-up meetings with Diaz and advised her again in English and Spanish that continuing to work constituted acceptance of the agreement. On December 23, 2016, Diaz filed a discrimination suit against the Company while her counsel simultaneously sent a letter to the Company reiterating that Diaz rejects the arbitration agreement but she still intends to continue her employment.

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