Again, NLRB Strikes Arb Agreement Waiving Class Claims in Buy-Low Market v. Palacios

In yet another decision, the National Labor Relations Board (“NLRB”) continues to mount pressure on employers seeking to enforce arbitration agreements that contain class action waivers. On February 3, 2017, in Buy-Low Market, Inc. v. Palacios, Case No. 21-CA-173346 (slip op. available here), the NLRB found that California-based retail grocery chain Buy-Low Market, Inc. (“Buy-Low”) violated the National Labor Relations Act (“NLRA”) and ordered the chain to cease and desist from enforcing an arbitration agreement that requires employees to waive their right to file employment-related class or collective actions in all forums (i.e. a class action waiver). Specifically, the NLRB found that the class waiver violated Section 8(a)(1) of the NLRA, which prohibits interference with or restraint of employees’ rights to organize and engage in concerted activities.

Back in July 2015, Plaintiff Nesked Palacios filed a wage-and-hour class action lawsuit against Defendant Buy-Low. On September 25, 2015, Buy-Low demanded that, pursuant to the parties’ arbitration agreement, Palacios submit his individual claim to arbitration and dismiss his class claims. The arbitration agreement stated, in pertinent part:

Agreement to Arbitrate: Designated Claims: The Employer and the Employee agree to resolve through binding arbitration any disputes or claims having anything to do with the Employer’s application for employment, employment, or separation from employment with the Employer [. . .].

Buy-Low Market, Case No. 21-CA-173346, at 2. Though the agreement did not expressly preclude class or collective action, on May 2, 2016, Judge Kenneth R. Freeman of Los Angeles County Superior Court granted Buy-Low’s motion, and not only compelled Palacios to arbitration, but also prevented Palacios from pursing class claims in arbitration.

On April 5, 2016, Palacios brought his case before the NLRB. The NLRB made several points in challenging the trial court’s interpretation of the parties’ arbitration agreement. First, Buy-Low contended that the provision was not, in fact, mandatory, but the NLRB rejected this contention, considering that the agreement was signed on the first day of employment, with other on-boarding documents, and did not clarify whether the arbitration provision was mandatory or optional. “When being asked to sign the Agreement, at the start of employment, an employee would not likely refuse to sign.” Slip op. at 4. Furthermore, the NLRB has held that an employer violates the National Labor Relations Act whether or not an arbitration agreement is mandatory or voluntary. Id. Even a “voluntary” arbitration agreement, or one that has an opt-out provision, that requires employees to prospectively waive their NLRA Section 7 right to self-organize, violates federal law. Id. (citing On 25 Assignment Staffing Services, 362 NLRB No. 189 (2015)).

With this holding, the battle over the validity of class action waivers continues and will not be resolved definitively until the Supreme Court of the United States decides a group of several related cases. On January 13, 2017, the Supreme Court granted certiorari in NLRB v. Murphy Oil USA, Inc., along with Epic Systems Corp. v. Lewis, 823 F.3d 1147 (7th Cir. 2016), cert. granted 2017 WL 125664 (Jan. 13, 2017), and Ernst & Young, et al. v. Morris, 834 F.3d 975 (9th Cir. 2016), cert. granted, 2017 WL 125665 (Jan. 13, 2017), to assess the validity of the NLRB’s D.R. Horton decision, which held that Section 7 protected employees’ ability to engage in “concerted activities” and superseded Concepcion. Oral argument has been postponed until the 2017 term, where many expect a full Supreme Court to be sitting. These three cases present the issue of whether arbitration agreements that bar employees from pursuing work-related claims on a collective or class basis in any forum violates Sec. 8(a)(1) of the Act, which was the very issue raised in Buy-Low Market. As such, the current legal landscape for class action waivers is in flux, and remains an issue to monitor. 

Authored by: 
Ruhandy Glezakos, Associate
CAPSTONE LAW APC