United States: The Sixth Circuit Holds That Class Action Arbitration Waivers Are Prohibited Under The National Labor Relations Act

The Sixth Circuit enforced a National Labor Relations Board's ("NLRB") order finding that Alternative Entertainment Inc., a Michigan-based satellite television retailer, violated the National Labor Relations Act ("NLRA") by requiring employees to sign arbitration agreements that precluded them from pursuing class or collective arbitration claims. The Sixth Circuit noted that the NLRA guarantees the right to concerted legal action and does not permit employers to force individual arbitration of employees' employment or workplace-related claims, stating "[m]andatory arbitration provisions that permit only individual arbitration of employment-related claims are illegal pursuant to the NLRA and unenforceable pursuant to the [Federal Arbitration Act's] saving clause."

The NLRB was seeking enforcement of its order finding that Alternative Entertainment violated the NLRA when it forbade an employee from talking with his co-workers about a proposed compensation change and by firing the employee for complaining to management about it, as well as when it barred employees from pursuing class action litigation or collective arbitration of work-related claims. The NLRB sought to enforce the award, and Alternative Entertainment sought relief from the order.

In holding that the NRLA prevents employers from pursuing class action litigation or collective arbitration of workplace-related claims, the Sixth Circuit joined previous rulings by the Seventh and Ninth Circuits. To the contrary, the Fifth and Eighth Circuit have held the opposite and have found class arbitration waiver provisions to be enforceable despite the NLRB's claim that this kind of arbitration provision violates Section 7 of the NLRA. The Supreme Court has accepted this issue for review and presumably will resolve this Circuit conflict. National Labor Relations Board v. Alternative Entertainment, Inc., No. 16-1385 (6th Cir. May 26, 2017).

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