Judge rules opt-out class-action waivers are illegal under the NLRA, orders employer to notify courts that it no longer wants to enforce illegal class-action waivers

The recent 24 Hour Fitness USA, Inc. [https://www.nlrb.gov/news/nlrb-judge-finds-24-hour-fitness-arbitration-clause-violates-federal-labor-law] decision by an NLRB administrative law judge (“ALJ”) is the latest development in the struggle against arbitration ‘agreements’ that have class- or collective-action waivers. 

Many non-union employers require employees to sign agreements to arbitrate workplace disputes, rather than litigate in a courtroom.  These arbitration agreements may contain class- or collective-action waivers.  A class- or collective-action waiver means that an employee gives up the right to join together with fellow employees to take legal action against the employer.  For example, a class-action waiver would prevent employees who were not paid overtime from jointly suing their employer for unpaid wages.  Earlier this year in the D.R. Horton decision, the NLRB ruled that class-action waivers are illegal. [link to: http://www.unioncounsel.net/developments/private_sector/can_employers_require_workers_to_sign_away_their_right.html]

The 24 Hour Fitness decision is notable for at least two separate reasons.  First, the decision held that class-action waivers are illegal even if employees can “opt-out” of the requirement to arbitrate.  The ALJ found that the opt-out procedure was “an unlawful burden on the right of employees to engage in collective litigation that may arise in the future.”  Second, the decision breaks new ground in the way of NLRB remedies.  To give some background:  an employer can enforce a class-action waiver in court.  For example, if employees who had signed the waiver subsequently filed a class action against the employer, the employer would present the waiver to the court and ask the court to dismiss the class action.  In fact, 24 Hour Fitness had done just that in several cases.  The 24 Hour Fitness decision went so far as to requiring the employer to notify any court where it had sought enforcement of the class-action waiver that it “no longer objects to it[s] employees bringing or participating in . . . class or collective actions.” 

The 24 Hour Fitness decision is not yet “Board law,” and the employer may appeal this decision to the NLRB.  If appealed, the Obama Board would be presented with a significant opportunity to strengthen workers’ rights and encourage more effective, creative use of the Board’s remedial powers.

By Sean Graham

Legal Developments