NLRB Decision Outlaws Broad Mandatory Arbitration Policy

July 17, 2006

Last month the National Labor Relations Board (Board) issued an important but narrowly-reported decision finding the publication of a broad mandatory employment arbitration policy a per se violation of Sections 8(a)(1) and (4) of the Act. The decision is particularly significant because it was not the Company's enforcement of the policy, but rather its mere publication of the policy, on which the Board relied to find the policy unlawful.

The U-Haul Company of California policy includes language typical of such alternative dispute resolution policies, including that the policy:

. . . applies to all UCC [U-Haul Company of California] employees ... and covers all disputes relating to or arising out of an employee?s employment with UCC or the termination of that employment. Examples of the type of disputes or claims covered by the UAP [U-Haul Arbitration Policy] include, but are not limited to, claims for wrongful termination of employment, breach of contract, fraud, employment discrimination, harassment or retaliation under the Americans With Disabilities Act, the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964 and its amendment, the California Fair Employment and Housing Act or any other state or local anti-discrimination laws, tort claims, wage or overtime claims or other claims under the Labor Code, or any other legal or equitable claims and causes of action recognized by local, state or federal law or regulations.

The policy also advises applicants and employees that: "Your decision to accept employment or to continue employment with UCC constitutes your agreement to be bound by the UAP."

The Board found that the policy violates the Act because it would "reasonably tend to inhibit employees" from filing unfair labor practice charges with the Board." The Board specifically targeted the phrase any other legal or equitable claims and causes of action recognized by local, state, or federal law or regulations? as reasonably including the filing of charges with the Board, leading employees to believe that they are precluded from filing such charges, in violation of Sections 8(a)(1) and (4) of the Act.

Although recognizing that the policy does not explicitly restrict employees from filing charges, the Board nevertheless found that the language of the policy alone --- even without any evidence of its having been enforced or interpreted in this manner --- was enough to lead employees unlawfully to the belief that they must resort to the policy's arbitration procedures instead of filing charges with the Board.

In dissent, Chairman Battista noted that there is no express inclusion of Section 7 rights in the scope of the policy, a feature the Board had previously required in outlawing such policies, and that there was neither evidence that the policy had ever been applied to Board processes nor evidence that it was ever intended to apply to Board processes.

Significantly, in its broad remedial Order, the Board required the Company to:

... remove from its files all unlawful waivers of the right to take legal action executed by its employees, and within 3 days thereafter, notify in writing each present or former employee who executed such waiver that this has been done and that the waiver will not be used in any way. (Emphasis supplied).

This is an important development for employers in considering whether to adopt alternative dispute resolution policies, in drafting employment contracts, handbooks and policies and in modifying existing policy language. The position of the Board in U-Haul Company of California may also affect similar language in other releases.