• Mandatory Arbitration Policies and Agreements Must Expressly Exclude NLRA Charges
  • August 23, 2006
  • Law Firm: Duane Morris LLP - Philadelphia Office
  • The National Labor Relations Board ("the Board") recently added to the complexities associated with drafting an enforceable mandatory arbitration agreement. In its June 8, 2006, decision in U-Haul Co. of California, 347 NLRB No. 34 (2006), the Board held that an employer's mandatory arbitration policy violated the National Labor Relations Act ("NLRA") because it was drafted too broadly, failing to expressly exclude unfair labor practices charges.

    In May 2003, U-Haul distributed to its workforce a mandatory arbitration policy providing that all disputes relating to or arising out of an employee's employment with U-Haul or the termination of that employment would be subject to mandatory arbitration. The arbitration policy specifically provided that it applied to:

    . . .claims for wrongful termination of employment, breach of contract, fraud, employment discrimination, harassment or retaliation under the Americans With Disabilities Act, the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964 and its amendments, the California Fair Employment and Housing Act or any other state or local anti-discrimination laws, tort claims, wage or overtime claims or other claims under the Labor Code, or any other legal or equitable claims and causes of action recognized by local, state or federal law or regulations.
    Although nothing in the arbitration policy explicitly restricted employees from filing unfair labor practice charges with the NLRB, the Board found the breadth of the policy's language troubling. Specifically, the arbitration policy's reference to causes of action "recognized by . . . federal law or regulations," according to the Board, could reasonably be construed by employees to encompass, and require arbitration of, unfair labor practices charges. Because the arbitration policy could reasonably be read to preclude the filing of unfair labor practices with the Board, it was found to violate the NLRA.

     The Board did not find persuasive U-Haul's argument that it had, contemporaneous with the adoption of the arbitration policy, distributed a memo to employees explaining that the policy was limited only to matters that might otherwise be adjudicated in a "court of law." The Board believed that the memo did little to clarify the breadth of the policy because even NLRB decisions, although administrative in nature, may be appealed to the United States Court of Appeals.

    In invalidating U-Haul's policy, the Board was careful to note that it was not opining on the lawfulness of mandatory arbitration policies or agreements generally, but merely passing upon the specific language included in U-Haul's policy. Because U-Haul's arbitration policy was found to violate the NLRA, the company was ordered to: (1) cease and desist from requiring employees to execute the arbitration policy as written; (2) remove all signed arbitration policies from employee files and notify present and former employees of the unenforceability of the signed policy; and (3) post a remedial notice regarding the policy.

    Practical Tip for Employers

    The Board's decision in this case has important ramifications for employers who require arbitration of workplace disputes. Employers should review their existing agreements with the assistance of counsel to ensure they comply with recent developments and are enforceable. In addition to other applicable requirements, any arbitration agreements should now explicitly exclude unfair labor practices charges employees may file with the NLRB.