On August 14, 2019, the National Labor Relations Board ruled that employers can revise mandatory arbitration agreements to prohibit employees from joining class and collective actions even after a suit has been filed. The NLRB further held that employers may condition continued employment on the execution of the amended agreement and threaten to terminate those who refuse. Neither action was found to violate Section 8(a)(1) of the National Labor Relations Act, which prohibits employers from interfering with employees’ union-related activities under Section 7 of the Act.

In the case at bar, a group of employees filed a collective action claiming that the employer violated theFair Labor Standard Act and Texas’ Minimum Wage Act. Shortly thereafter, employees began opting-into the collective action. After several employees joined the litigation, the employer circulated a revised arbitration agreement under which the employees agreed that they would not opt into to collective actions. The employees asserted that the revised agreement was retaliatory for exercising their rights under the NLRA.

The NLRB assumed that opting into a collective action was protected activity under Section 7 of theNLRA and held that the revise agreement did not violate the Act. The NLRB reasoned that the SupremeCourt’s decision in Epic Systems. v. Lewis, 138 S. Ct. 1612 (2018) clearly stated that arbitration agreements containing class and collective action waivers were permissible under the NLRA and theFederal Arbitration Act. Accordingly, the Board noted that it had repeatedly dismissed complaints alleging that employers unlawfully maintained or enforced arbitration agreements requiring employees, as a condition of their employment, to waive their right to pursue class resolution of their employment-related claims. This case was no different.

Because opting into a collective action is “merely a procedural step” for employees to participate in a collective action, the Board concluded that an arbitration agreement prohibiting employees from opting into a collective action does not restrict the exercise of Section 7 rights or violate the NLRA. The Board distinguished prior decisions where it held that a lawful rule promulgated in response to protected activity was invalid. Those decisions, however, addressed employers’ actions the specifically prohibited employees from soliciting others to unionize or otherwise interfered with union activities through disciplinary means. The challenged action in this case failed to rise to that level and was therefore permissible under the NLRA and Epic Systems.

The Board’s focus on the procedural nature of the employer’s action may land the case before the Supreme Court in the October 2021 term. It was undisputed that the employer’s actions were a direct response to an increasing number of employees opting into a collective action. The employer’s strongest argument in any future litigation is that the arbitration agreement already included a class/collective-action waiver. As the Board noted, the revised arbitration agreement merely reiterated that an employee’s claims must be resolved through individualized arbitration, which is perfectly permissible under current Supreme Court precedent.

The Board’s decision highlights that in the wake of Epic Systems, employers have more latitude to force employees into individualized resolution of employment-related claims. This even appears to be the case when that action is motivated by arguably protected activity under the NLRA.