NLRB Judge: Requiring Confidential Arbitration is an Unfair Labor Practice

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By: Jack Blum

While the U.S. Supreme Court’s recent decisions have generally supported the enforceability of employment-related arbitration agreements, mandatory employment arbitration remains under fire in other contexts.  The latest example  came on March 21, 2019, when a National Labor Relations Board (NLRB) administrative law judge (ALJ) ruled in Pfizer, Inc., Case 10-CA-175850 that an employer’s arbitration agreement requiring employees to engage in  confidential  arbitration proceedings and prohibiting disclosure of arbitration-related submissions and materials constituted an unfair labor practice prohibited by the National Labor Relations Act (NLRA).

The ALJ’s decision comes in the wake of the Supreme Court’s Epic Systems decision, which rejected a similar argument that the NLRA prohibits employers from requiring employees to arbitrate their claims on an individual basis and waive the ability to bring claims on a class or collective basis.  In an attempt to distinguish Epic Systems, the ALJ reasoned that while the Epic Systems Court endorsed an arbitration agreement’s limitation of the procedural right to litigate as a class or collective, it did not permit limitations on substantive rights, such as an employee’s right under the NLRA to engage in “concerted activity” by discussing his or her terms and conditions of employment with co-workers and others. The ALJ also ruled that a limiting clause in the arbitration agreement stating that the confidentiality requirement did not “prohibit employees from engaging in protected discussion or activity relating to the workplace, such as discussions of wages, hours, or other terms and conditions of employment,” was insufficient to save the agreement because it did not explicitly permit disclosure of arbitration-related materials in furtherance of NLRA-protected activity.

The ability to maintain the confidentiality of arbitration proceedings is one benefit that employers may seek through mandatory arbitration.  However, the ability to compel confidential arbitration is being challenged by legislative action, public awareness campaigns, in agency proceedings, and in the courts.  As the ALJ’s decision may be subject to further review before the NLRB and a federal court of appeals, employers that rely on confidential arbitration agreements should consult with counsel to stay abreast of any developments and ensure that their agreements do not run afoul of the NLRA or other federal and state statutes.