A National Labor Relations Board administrative law judge ruled that agreements signed by employees of Oklahoma-based arts and crafts company Hobby Lobby requiring them to submit to arbitration rather than go to court in work disputes are unenforceable.
The ruling by the government’s labor enforcement agency, announced Wednesday, could potentially undermine a common practice used by employers to avoid litigation under federal labor laws.
“This is a dramatic decision,” said David Rosenfeld, attorney for the Committee to Preserve the Religious Right to Organize, the group that brought the charges against Hobby Lobby. “If the board affirms it and the courts affirm it, it basically undermines this whole tendency of employers to implement these arbitration agreements [with their employees].”
Catherine Fisk, co-director of the University of California at Irvine’s Center in Law, Society and Culture, agreed with Rosenfeld’s assessment, calling the judge’s decision “a very clever analysis” that could potentially apply to a wide variety of employment disputes.
“This argument could be made by any litigant in any court who wants to file a claim for failure to pay the minimum wage or whatever. When the employer moves to compel arbitration (rather than remain in court) this argument is available to anybody to say the arbitration agreement isn’t enforceable,” she said.
Agreements to waive rights in favor of arbitration are allowed under the Federal Arbitration Act, Fisk noted. What the judge’s decision in effect said is that those arbitration agreements are only enforceable under the act if they are included as part of an employment contract. Otherwise, the agreements cannot be said to involve economic activity and therefore don’t trigger the “interstate commerce” requirement for federal laws.
The arbitration agreements in the Hobby Lobby case specifically state they are not part an employment agreement, a provision intended to keep them outside of the scope of the federal employment laws such as the National Labor Relations Act. Essentially, the company wanted the workers to agree to arbitration in any employment dispute without saying the agreement also triggered the company’s responsibilities under other federal employment laws. These types of arbitration agreements are widely used by many employers, Fisk argued.
The labor board judge said Hobby Lobby cannot have it both ways. “The [arbitration agreement] is worded very broadly, and explicitly states it applies to ‘any dispute, demand, claim, controversy, cause of action, or suit … that employee may have’ at any time that ‘in any way arises out of, involves, or relates to employee’s employment’ with the respondent. This would certainly encompass an unfair labor practice charge with the board,” the judge said.
A spokesman for Hobby Lobby could not be reached for comment.
Hobby Lobby was at the heart of a controversial Supreme Court case last year involving whether a private company can be required under Obamacare to provide their female employees with health insurance that includes coverage that violates the owner’s religious beliefs. The court ruled, 5-4, in favor of Hobby Lobby. Supporters of the decision argued it was an important affirmation of religious freedom. Critics argued it was wrong to expand those rights to for-profit companies.
