NLRB Orders Cedars-Sinai to Rescind and Revise Its Mandatory Arbitration Pacts

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Last month, a National Labor Relations Board (NLRB) judge in San Francisco ordered Los Angeles’s famed hospital, Cedars-Sinai Medical Center, to stop using its mandatory arbitration agreements to prohibit employees from bringing class action lawsuits. Administrative Law Judge Artiel Sotolongo also ruled that the hospital must fix the provisions of its agreements that could mislead employees to believe they cannot file unfair labor charges before the NLRB. Cedars-Sinai Med. Ctr., 31-CA-143038, 2016 WL 1042504 (March 15, 2016).

In 2014, a medical staff assistant who worked for the hospital from July 2011 to May 2013, filed a complaint with the American Arbitration Association seeking class action status and an unfair labor practices charge with the NLRB. Thereafter, Cedars-Sinai moved to compel individual arbitration against her in February 2015 by filing a complaint for declaratory relief in a state action in Los Angeles Superior Court (BC571046).

Judge Sotolongo’s decision relied on the NLRB’s decisions in D. R. Horton, 357 NLRB 2277 (2012), enf. denied in relevant part 737 F.3d 344 (5th Cir. 3013), and Murphy Oil USA, Inc., 361 NLRB No. 72 (2014), enf. denied in part 808 F.3d 1013 (5th Cir. 2015), both of which held that enforcement of individual arbitration on employees seeking class labor law claims was illegal. See slip op. at 6-7. Unlike D.R. Horton and Murphy Oil, however, the mandatory arbitration agreement in Cedars-Sinai does not explicitly preclude employees from initiating or seeking class or collective action status in arbitration or in other forums; it is silent on the issue. Because of this, Judge Sotolongo held that the applicable standard here was an objective one—that is, whether employees could reasonably interpret the language of the agreement to act as a barrier to filing charges with the Board, among other criteria, such as whether the rule was issued in response to union activity (it was not). The court concluded that employees could reasonably interpret Cedars-Sinai’s agreement to bar class or collective actions. Slip op. at 6-8. Because of the sweeping language stating workers were required to submit to arbitration “all statutory, contractual and/or common law claims,” the judge gave little weight to the exceptions listed in the arbitration agreement, such as the exclusion of claims “preempted by federal labor laws,” finding it “too vague” for a worker with no legal training to understand its consequences. Id. at 6-7. However, D.R. Horton and Murphy Oil did apply where the hospital tried to enforce the arbitration agreement by filing the declaratory state court action to compel the employee into individually arbitrating her employment-related claims. This restricts employee rights under section 7 of the National Labor Relations Act to pursue concerted or collective action, and thus Cedars-Sinai was in violation.

Although the Fifth Circuit has rejected the NLRB’s views on both D. R. Horton and Murphy Oil, Judge Sotolongo wrote that he was “compelled to follow the Board’s decisions unless the Supreme Court overrules the Board.” Slip op. at 9. Thus, he ordered Cedars-Sinai to “rescind [or revise] the mandatory and binding arbitration agreements in all of its forms,” provide employees with notice of such changes, notify the state court of the revision and rescission of the arbitration agreement (upon which Cedars-Sinai had based its claim to compel individual arbitration), and to inform the state court that it no longer opposes the lawsuit on the basis of that arbitration agreement. Id. at 11. Any revision, the judge stated, should clarify that such an agreement does not restrict employees from pursuing wage-and-hour actions or other employment-related actions on a class or collective basis in any forum, and specifically does not prevent employees from filing charges with the NLRB. Id. at 10. Cedars-Sinai was also required to reimburse the employee for reasonable attorneys’ fees and expenses, with interest. Id. at 12.

Authored by:
Natalie Torbati, Associate