Heavy Scrutiny of Employment Agreements

Agreements within employment contracts and employee handbooks continue to be subject to strict scrutiny by the NLRB. In a recent decision, the Sixth Circuit enforced an NLRB Order finding multiple NLRA violations for prohibiting employees from engaging in “collective bargaining.” The issue should be of interest to all employers given the common misconception that the NLRA only applies to unionized employers.

The NLRA applies to union and non-union employers, with certain exceptions. “Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection….” The Act also states that it “shall be an unfair labor practice for an employer … to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed” by the Act.

In Nat’l Labor Relations Bd. vs. Alternative Entm’t, Inc., the court focused on the employer’s requirement that employees sign an agreement that all disputes relating to employment would be resolved through arbitration. The agreement also stated that a claim could not be arbitrated as a class action. When an employee complained to management about changes to his compensation structure, he was told not to speak to other employees about the issue. The employee was soon after terminated.

In its decision, the Sixth Circuit upheld the NLRB Order finding NLRA violations for barring employees from pursuing class-action litigation or collective arbitration of work-related claims, for forbidding an employee from discussing a proposed compensation change with coworkers and for firing that employee for discussing the proposed change and complaining to management.

The NLRB Order demanded the employer offer the terminated employee his job back, make him whole for any loss of earnings or benefits, cease and desist from maintaining policies in violation of the NLRA, and to post a written notice to all employees informing the workforce that it violated the NLRA.

The Sixth Circuit joins others, including the Ninth Circuit and Seventh Circuit, in holding arbitration provisions mandating individual arbitration of employment-related clams violate the NLRA. Employers are well advised to revisit the language in their employee handbooks to ensure compliance with the NLRA.


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