Skip to main content

Mandatory Employee Arbitration Agreements: Introduction

Employment Law: A focus on the legal validity of mandatory employee arbitration agreements

Introduction

Introduction:

Many employers want their employees to sign arbitration agreements. These employee arbitration agreements can have an array of requirements and can come in a variety of different forms. Usually, the agreement includes language which requires an employee to waive his or her right to bring legal claims against the employer in court. Instead of bringing claims in court, the employee agrees to submit his or her legal claims to binding arbitration only. An employee arbitration agreement might also be mandatory, meaning that the employee must sign the agreement as a condition of continued employment. Additionally, an employee arbitration agreement might prohibit an employee from filing any class or collective actions, both in court and in arbitration. This is often referred to as a "class or collective action waiver."

The legality of these employee arbitration agreements, especially those agreements that are mandatory and require the waiver of class or collective actions, has been a hotly debated issue that has elicited varying decisions. 

Federal courts attempting to determine whether arbitration agreements are valid consistently cite to the Federal Arbitration Act ("FAA") as the controlling legal standard. Specifically, these federal courts rely on Section 2 of the FAA and thus treat arbitration agreements like contracts subject to contract law. Courts using this line of reasoning under the FAA have liberally construed mandatory employee arbitration agreements, even those including agreements that require the waiver of class or collective actions, in favor of binding arbitration. Conversely, the National Labor Relations Board ("NLRB" or "the Board") has evaluated claims involving violations of employee arbitration agreements by relying on Sections 7 and 8 of the National Labor Relations Act ("NLRA"). Through such reliance on and subsequent interpretation of the NLRA, the NLRB has set a much less liberal standard for determining the legality of mandatory employee arbitration agreements. Consequently, in relying on the NLRA, the Board has found that certain mandatory employee arbitration agreements are invalid. 

These starkly different interpretations, as assessed under both the FAA and the NLRA, have caused a deep split in the law. This split of authority has implications for decision makers trying to interpret and apply the law, employers trying to utilize arbitration agreements, and employees seeking to maintain their guaranteed rights. 

Scope and Purpose:

This guide provides an overview of the law surrounding mandatory employee arbitration agreements, particularly those agreements that include class action waivers. Specifically, the guide focuses on the law as it has been interpreted by the NLRB and the federal courts (under both the NLRA and the FAA.) This guide also recommends a variety of valuable resources available to those seeking to understand the many issues involved in the enforceability of employee arbitration agreements. 

Guide Map and Layout:

This guide includes six different tabs: Introduction (which is the current tab selected), Secondary Sources, Primary Sources, Current Awareness, and Sample Agreements.

The Introduction tab gives a brief overview of mandatory arbitration agreements and also reviews the scope, purpose, and layout of the guide. Additionally, the tab provides a "Research Strategy" (located at the bottom of the Introduction page) for mandatory employee arbitration agreements. The Research Strategy box is a great starting point for anyone attempting to begin research in this complicated area of law.

The Secondary Sources tab analyzes multiple secondary sources regarding employee arbitration agreements. This tab also includes the features, usability, cost, and scope of each source. Additionally, this tab provides two sample arbitration agreements. 

The Primary Sources tab includes a breakdown of the most recent caselaw dealing with mandatory employee arbitration agreements, as well as an assessment of available online services (like LexisNexis, Westlaw, and Bloomberg.) The sub-tabs, "Federal Courts" and "National Labor Relations Board" provides a summary of important primary sources under each of these sectors. 

The Current Awareness tab reveals blogs, news sites, and other similar sources that enable a practitioner to keep up to date and informed about the enforceability of mandatory employee arbitration agreements. This is particularly beneficial as the law in this area has been changing at an incredibly fast pace (with each new decision by the NLRB and the federal courts!)

The Research Problems tab allows those interested in testing their research skills to answer sample problems that a new attorney reviewing this topic might encounter while the Research Strategy tab provides the best ways to find the answers to the problems.

Lastly, the Conclusion tab briefly summarizes the main points of this guide and the major research challenges for someone new to this field.

   



Research Strategy

As previously mentioned, the enforceability of mandatory employee arbitration agreements containing class or collective action waivers has been a highly debated issue that has elicited varying decisions. It is important for employers and employees alike to understand what the conflicting decisions mean and how the law might be interpreted in the future. The following information provides a beneficial research strategy for someone trying to gain more information in this field of law:

Getting Started: Secondary Sources

Always start with secondary sources! A simple Google search can often point a researcher to important decisions by the NLRB and the federal courts. However, secondary sources allow information seekers to actually understand many of these highly complicated decisions and often provide for a much more thorough review of cases too. Therefore, it is most beneficial for someone researching this topic to begin by looking at secondary resources. The Secondary Sources tab of this guide lists and analyzes many of the beneficial treatises and aids for those seeking to understand this specialized area of Employment/Arbitration law. The tab even shows a video that provides a great overview of the big picture issues. Secondary sources are also often the best place to start because they discuss and thus direct researchers to many of the useful primary sources.

Sample Employee Arbitration Agreements:

If a researcher intends to draft an employee arbitration agreement, as opposed to researching a specific legal question, he or she may want to have sample agreements in hand before looking at relevant caselaw and statutes/acts. This strategy allows the researcher to check the specific provisions included in the agreement against the caselaw and rules. Such a strategy provides for a more "bulletproof" employee arbitration agreement that is in compliance with the current law.

Bonus: The Secondary Sources tab provides some reputable sample agreements!

Know the Law: Primary Sources

After reviewing secondary resources and obtaining a good understanding of how the employment law and arbitration systems function, a researcher should move to primary sources. Fortunately, this guide does a lot of the work for you! The Primary Sources tab discusses and explains a number of cases that set an important precedent in this area of law. The tab also includes an analysis of the best online services for finding such caselaw. Keep in mind that because decisions coming from the NLRB are administrative, it is often difficult to uncover many of these cases on LexisNexis and Westlaw. Thus, as the Primary Sources tab indicates, it might be more efficient to search for certain NLRB decisions on the NLRB's website or elsewhere. Additionally, it is important for a researcher to look at the FAA and the NLRA as these laws dictate the decisions coming out of the federal courts and the NLRB. The Primary Sources tab also includes the pertinent parts of these Acts. 

Be Aware, Be Very Aware

Even after looking at secondary and primary sources, a researcher has to stay up-to-date on caselaw! There have been a laundry-list of these decisions issued within the last year, and each has had an effect on enforceability of employee arbitration agreements. Consequently, it is very important for any person who is researching such agreements to stay up-to-date on the opinions being issued by both the NLRB and the federal courts. This can be accomplished through a variety of ways, including everything from automatic Bloomberg email updates to resourceful and frequently updated blogs. The Current Awareness tab (very important!) of this guide discusses many sources for maintaining current awareness in this ever-changing area of law.

Student Guide Author

Marcy Greenwade is a 2014 graduate of the University of Missouri School of Law. During law school, Marcy served as a published member of the University of Missouri Journal of Dispute Resolution.

This guide was originally created in support of Professor Diamond's Advanced Legal Research class for Spring 2014. The contents of this guide should not be taken as legal advice or as the work product of MU Law librarians.