Last week, the National Labor Relations Board (NLRB) issued a decision in Cordúa Restaurants, Inc., that permits employers to create and enforce arbitration agreements with collective waivers in direct response to Fair Labor Standards Act (FLSA) collective actions filed by employees. The NLRB also found that warning employees of discharge for failure to agree to an arbitration agreement is not a violation of the National Labor Relations Act (NLRA). This decision follows the Supreme Court’s May 2018 ruling in Epic Systems Corp. v. Lewis, that approved the employer’s use of mandatory arbitration agreements with class action waivers. Check out our prior blog posts on Epic and arbitration clauses.

What happened in Cordúa?

A group of employees filed a collective action alleging violations of federal and state wage laws.  After the lawsuit was filed, the employer required its employees to sign a revised arbitration agreement that prohibited employees from filing collective actions and opting in to collective action suits. The NLRB found that the employer had lawfully implemented the arbitration agreement under Epic Systems. The NLRB also found that requiring employees to agree to arbitrate rather than pursuing collective action (and face potential termination if they don’t agree) is lawful.

What does this mean for employers?

The NLRB has said that employers can mandate that employees sign arbitration agreements even after litigation has begun and can lawfully terminate employees if they refuse to sign such an agreement. While last week’s NLRB decision signals a positive shift in favor of employers, courts may still scrutinize arbitration agreements enforced in response to collective action lawsuits and any disciplinary actions taken by employers against employees who refuse to sign an arbitration agreement.