The NLRB and Now the Seventh Circuit Appellate Court in Chicago, Threaten Arbitration Agreements That Prevent Class Action Lawsuits by Employees

May 2016

James B. Sherman, Esq.

The use of arbitration as a means to resolve disputes that otherwise would proceed in court, has grown exponentially over the past decade. Besides the cost savings over litigation (at least in theory), one of the biggest reasons employers have turned to arbitration is the ability to include “class waivers” in such agreements. A class waiver clause in an arbitration agreement requires the employee to take his or her dispute through arbitration alone, and forego class or collective claims with other employees.  These agreements have withstood challenges in court brought under the Federal Arbitration Act (FAA).  More recently, however, the National Labor Relations Board (NLRB) has decided to get involved. In its 2012 decision in D. R. Horton, the NLRB held that the right of employees to join together for mutual aid and protection – “concerted activities” protected by federal labor law - includes their right to pursue class-action arbitration or lawsuits outside the realm of the National Labor Relations Act (NLRA).  This far-reaching decision was promptly shot down by the U.S. Court of Appeals for the 5^th Circuit, in New Orleans.  However, on May 26, 2016, the 7^th Circuit Court of Appeals in Chicago, adopted the NLRB’s position in upholding its decision in Epic Systems Corp. In doing so, the 7^th Circuit gave broad deference to the NLRB’s opinion even though the Board was essentially straying far afield from labor matters.  For example, the decision would ban class waivers of everything from wage and hour to discrimination and harassment claims.

Now that a split exists on the issue between the 5^th and 7^th Circuits, a showdown in the Supreme Court seems likely. Management will no doubt support the 5^th Circuit’s position that the NLRB has exceed its authority under the NLRA. Of course unions, employees and perhaps most fervently, class-action plaintiff lawyers, will advocate strongly in favor of the recent decision of the 7^th Circuit. Both sides face uncertainty, given the vacancy left in the Supreme Court by the death of Justice Antonin Scalia and the political maneuvering over his replacement.  In the meantime, employers in Wisconsin, Illinois and Indiana are stuck with the 7^th Circuit’s decision upholding the NLRB’s position that class waiver clauses in arbitration agreements, violate federal labor law and therefore, are unlawful.  

NLRB Judge Rules that Employer Violated Federal Labor Law by Firing Employee for Profanity-Laced Derogatory Comment about a Customer

March 2016
By James B. Sherman, Esq.

Employers are likely to put this recent decision in the ever growing category of unthinkable rulings coming from the National Labor Relations Board (NLRB) these days. An employee of Quicken Loans commented to a co-worker during a conversation that took place in a restroom, that a customer needed to “call a client care specialist and stop wasting my [f-ing] time.” When a manager later learned of this the employee believed to have made the comment, was summarily discharged. Management declared that the offending employee was terminated to uphold a company culture where all employees are expected at all times to display the utmost degree of professionalism and integrity. However, as is becoming more and more common these days, even for those who are not represented by a union, the employee went to the NLRB to file an “unfair labor practice,” or ULP charge. Following an investigation the NLRB’s General Counsel issued a complaint against Quicken Loans and the matter went to a full evidentiary hearing. Following the hearing, Administrative Law Judge (ALJ) Dickie Montemayor ruled in the employee’s favor. Notwithstanding the employee’s use of a vulgarity in reference to a customer, the ALJ determined the profane comment nevertheless amounted to “concerted activity” worthy of protection under Section 7 of the National Labor Relations Act. The ALJ therefore ruled that Quicken Loans violated federal labor law and ordered the firm to: (1) rehire the employee; (2) pay him for all lost earnings and otherwise make him “whole”; and (3) eliminate any work rules that “unlawfully restrain … employees’ rights to discuss working conditions.” In other words, Quicken Loans’ expectations for employees to at all times display professionalism, integrity, etc. interfered with this employee’s “protected right” to refer to its customer using profanity and, therefore, was deemed an unlawful policy that could not be maintained!

Section 7 of the NLRA prohibits employers from unlawfully interfering with or restraining employees’ rights to engage in “concerted activity” for the purpose of “mutual aid and protection” in regards to terms and conditions of employment. For decades in the past, in order for conduct to be protected as “concerted” the NLRB has required that an employee must have acted on behalf of more employees than just himself or herself. However, in the Quicken Loans case the employee’s comment clearly was directed to a co-worker, complaining about a customer. How, you ask, can this have been found to involve mutual aid and protection for others? The ALJ somehow concluded that the employee’s profanity was a “preliminary action” necessary to “lay the groundwork for group activity.” Really? The ALJ appears to have used pure speculation to conclude that the employee’s f-bomb was used to cause the other employee to voice support for his complaints. Again, really?

The ALJ’s decision in Quicken Loans, if it stands, drastically broadens the scope of protected concerted activity to include individual actions or comments that do not involve other employees, and have little or nothing to do with mutual aid or protection. Many employers will no doubt be deeply troubled that this decision found that disciplining an employee for derogatory and vulgar comments aimed at his employer’s customers, was against federal labor law. However, the Quicken Loans decision could be opening a much larger “Pandora’s Box” of problems for employers. By defining concerted/group activities to include individual comments based on an NLRB judge’s unproven assumptions that an employee appearing to be acting alone, may have been “laying the groundwork” for concerted activities at some future point in time, concerted employee activities protected by federal labor law effectively would be without limitation.

Quite understandably, a spokesperson for Quicken Loans called the decision “ridiculous.”

Questions? Contact Attorney James Sherman in our Minneapolis office at (952) 746-1700 or jasherman@wesselssherman.com.

NLRB Judge Rules that Employer Violated Federal Labor Law by Firing Employee for Profanity-Laced Derogatory Comment about a Customer

Employers are likely to put this recent decision in the ever growing category of unthinkable rulings coming from the National Labor Relations Board (NLRB) these days.  An employee of Quicken Loans commented to a co-worker during a conversation that took place in a restroom, that a customer needed to “call a client care specialist and stop wasting my [f-ing] time.” When a manager later learned of this, the employee believed to have made the comment was summarily discharged.  Management declared that the offending employee was terminated to uphold a company culture where all employees are expected at all times to display the utmost degree of professionalism and integrity.  However, as is becoming more and more common these days, even for those who are not represented by a union, the employee went to the NLRB to file an “unfair labor practice,” or ULP charge. Following an investigation the NLRB’s General Counsel issued a complaint against Quicken Loans and the matter went to a full evidentiary hearing. Following the hearing, Administrative Law Judge (ALJ) Dickie Montemayor ruled in the employee’s favor. Notwithstanding the employee’s use of a vulgarity in reference to a customer, the ALJ determined the profane comment nevertheless amounted to “concerted activity” worthy of protection under Section 7 of the National Labor Relations Act.  The ALJ therefore ruled that Quicken Loans violated federal labor law and ordered the firm to: (1) rehire the employee; (2) pay him for all lost earnings and otherwise make him “whole”; and (3) eliminate any work rules that “unlawfully restrain … employees’ rights to discuss working conditions.”  In other words, Quicken Loans’ expectations for employees to at all times display professionalism, integrity, etc. interfered with this employee’s “protected right” to refer to its customer using profanity and, therefore, was deemed an unlawful policy that could not be maintained!

Section 7 of the NLRA prohibits employers from unlawfully interfering with or restraining employees’ rights to engage in “concerted activity” for the purpose of “mutual aid and protection” in regards to terms and conditions of employment. For decades in the past, in order for conduct to be protected as “concerted” the NLRB has required that an employee must have acted on behalf of more employees than just himself or herself. However, in the Quicken Loans case the employee’s comment clearly was directed to a co-worker, complaining about a customer.  How, you ask, can this have been found to involve mutual aid and protection for others?  The ALJ somehow concluded that the employee’s profanity was a “preliminary action” necessary to “lay the groundwork for group activity.” Really? The ALJ appears to have used pure speculation to conclude that the employee’s f-bomb was used to cause the other employee to voice support for his complaints. Again, really? 

The ALJ’s decision in Quicken Loans, if it stands, drastically broadens the scope of protected concerted activity to include individual actions or comments that do not involve other employees, and have little or nothing to do with mutual aid or protection.  Many employers will no doubt be deeply troubled that this decision found that disciplining an employee for derogatory and vulgar comments aimed at his employer’s customers, was against federal labor law.  However, the Quicken Loans decision could be opening a much larger “Pandora’s Box” of problems for employers. By defining concerted/group activities to include individual comments based on an NLRB judge’s unproven assumptions that an employee appearing to be acting alone, may have been “laying the groundwork” for concerted activities at some future point in time, concerted employee activities protected by federal labor law effectively would be without limitation. 

Quite understandably, a spokesperson for Quicken Loans called the decision “ridiculous.”

Questions? Contact Attorney James Sherman in our Minneapolis office at (952) 746-1700 or jasherman@wesselssherman.com.

College Football Players Union

This union organizing effort is a publicity stunt and the NLRB petition must be dismissed because scholarship athletes are not employees....MAYBE, MAYBE NOT.

Members of the football team at Northwestern University (85 scholarship athletes) are seeking to become the first labor union specific to college athletes, in an attempt to gain greater legal and financial rights. In an effort to gain these rights, the newly-created College Athletes Players Association, backed by the United Steelworkers, filed an election petition with Region 13 of the National Labor Relations Board (NLRB) in Chicago. The Chicago Regional Office is scheduled to hold a hearing beginning February 7 to determine whether the student-athletes are "employees" under the National Labor Relations Act (NLRA), and thus eligible to form a union. Wessels Sherman received this petition in response to our Freedom of Information Act request [click here to view the petition]. Regardless of whether college athletes are treated fairly under the current system, the NLRA only governs the employment relationship, so unionization may not be the proper avenue to seek improvements of the college athlete experience.

Other Related Cases

While this is the first time the NLRB will have to determine whether student-athletes are employees, other somewhat related cases concerning workers who do not fit into the traditional definition of "employees" may shed some light on how the NLRB will approach the issue.

The NLRB has gone back and forth regarding whether graduate student assistants are "employees," most recently determining in 2004 that they are primarily students, and therefore not statutory employees. In reaching this decision, the NLRB noted that "there is a significant risk, and indeed a strong likelihood, that the collective-bargaining process will be detrimental to the educational process." Although the NLRB announced in 2012 that it would reconsider the issue, the case was settled before the NLRB ruled on the issue.

The NLRB has also determined that unpaid volunteers are not employees within the meaning of the NLRA. The NLRB stated that "the relationship between the Employer and unpaid staff is not that of employer and employees contemplated by the Act. Unpaid staff do not depend upon the Employer, even in part for their livelihood or for the improvement of their economic standards. They do not work for hire and thus the Act's concern with balancing the bargaining power between employer and employees does not extend to them."

The NLRB determines on a case-by-case basis whether disabled workers in a sheltered workshop are employees. The relevant inquiry is whether the primary purpose of the workshop is rehabilitation-in which case the workers are not employees-or industrial-in which the workers are employees.

Finally, although not in the context of the NLRA, at least one court has determined that a football player from TCU who suffered a paralyzing injury was not an employee eligible for workers' compensation under Texas law, despite the fact that his room, board, and tuition were paid, in addition to a small allowance for incidentals. The court noted that both parties intended the player to attend the university as a student, not as an employee.

Predictions

Because we do not believe that student-athletes can reasonably be found to be employees under the NLRA, we believe that Region 13 of the NLRB in Chicago will dismiss this petition. However, this decision would likely be reviewed by the NLRB in Washington, D.C., and with its current makeup, what it is likely to do is more difficult to predict. We anticipate a lengthy hearing at Region 13 with Northwestern presenting testimony from the A.D., university administrators, coaches, and NCAA officials. Mountains of evidence will be presented showing no employment contract, no pay check, no withholding, no tax returns filed, no direction and control over student activities and the same direction and control in football activities over both scholarship and non-scholarship players.

The current, extremely labor-friendly, NLRB has had no qualms extending its reach in unprecedented ways. For example, in the controversial D.R. Horton decision, the NLRB declared that arbitration agreements that prevent employees from bringing class action lawsuits, violate the NLRA. The NLRB has also begun carefully scrutinizing non-union employers' social media policies and other handbook provisions to determine whether these provisions interfere with employees' rights under the NLRA. Finally, the recent Specialty Healthcare case has opened the door to "micro units." Although those cases did not concern the definition of employees, they illustrate other ways that the NLRB has recently asserted its authority in new ways.

Other Considerations

The football players in question attend Northwestern University, which is a private school. However, the majority of the universities with a strong emphasis on college sports are public, and thus outside of the reach of the NLRB; each state has its own distinct labor laws governing state employees. This could present a huge problem for the unionization of student-athletes on a larger scale.

Written by: Richard H. Wessels, Esq