Authors: Attorney John C. Mitby & Law Clerk Elizabeth L. Spencer
In April, the National Labor Relations Board (NLRB) ordered the DISH Network, LLC to revise or rescind its employment agreements after finding that provisions in the agreements violated federal law employee rights law. DISH Network, LLC, 365 NLRB No. 47 (2017). The case against DISH is an important reminder of the requirements and prohibitions of the National Labor Relations Act (NLRA) and of the often unintended consequences of blanket prohibitions.
Section 7 of the NLRA affirmatively grants employees rights including “the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection,” as well as the right “to refrain from any or all such activities.” While Section 8(a)(1) of the NLRA makes it unlawful to “interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in Section 7.”
In DISH’s case, beginning in October 2013, DISH required employment applicants to sign an Arbitration Agreement agreeing that any claim or controversy arising out of the employee’s application for employment, employment, or termination of employment shall be resolved by arbitration and that all information relating to any proceedings be kept confidential. The Agreement did not have a procedure for the employee to opt out of any arbitration. Employee Brett Denney signed the Agreement and two years later was suspended for suspected violation of a workplace policy. Denney was instructed to not discuss his suspension with coworkers. Denney filed a complaint with the NLRB alleging a violation of Section 8(a)(1) for forbidding him to discuss the suspension with coworkers and for maintaining and enforcing the Arbitration Agreement.
The NLRB first addressed the Arbitration Agreement. Section 8(a)(1) is violated if an employer maintains an arbitration policy that would reasonably interfere with an employee’s ability to file an NLRB charge or access the NLRB’s process. The NLRB has endorsed the Lutheran Heritage test for determining when the rule does not explicitly restrict Section 7 activities but nevertheless is unlawful. Specifically the test weighs three factors: if (1) employees would reasonably construe the language to prohibit Section 7 activity; (2) the rule was promulgated in response to a Section 7 activity; or (3) the rule has been applied to restrict the exercise of such activity. Lutheran Heritage Village-Livonia, 343 NLRB 646, 647 (2004).
The NLRB found that the Arbitration Agreement violated Section 8(a)(1) under the first prong of the Lutheran Heritage test as the employees would reasonably construe the Agreement to prohibit filing NLRB charges or accessing the NLRB’s process. The DISH agreement was very broad in that it applied to “any claim, controversy, and/or dispute between them, arising out of and/or in any way related” to the employee. The NLRB has found in previous cases that a policy requiring arbitration in all disputes violated Section 8(a)(1) because employees would reasonably construe it to prohibit the filing of NLRB charges even when the policy did not specifically state that. Further, the confidentiality requirement independently violated Section 8(a)(1) because a work placerule that prohibits discussion of terms and conditions of employment is unlawfully broad.
Next, the NLRB addressed the instruction that Denney not discuss the suspension. It is well established that under Section 7 that employees have the right to discuss disciplinary investigations with coworkers. An employer’s restriction on these types of discussion is unlawful unless the employer can demonstrate a legitimate and substantial business justification outweighing the infringement of employee rights. The stipulated facts showed that Denney was instructed to not discuss the suspension and thus the instruction violated Section 8(a)(1).
Upon finding that DISH engaged in unfair labor practices, the NLRB ordered it to cease and desist and take affirmative actions to effectuate the policies of the NLRA. Further, the NLRB required that DISH to rescind or revise the Arbitration Agreement, to notify current and former employees of this action, and post and distribute electronically notices at certain DISH locations of this action and order.
Employers must be aware that even if the terms of an employment agreement do not explicitly violate any Section 7 rights or Section 8(a)(1) prohibitions, if they can reasonably interpreted by employees as “chilling” employee action they may be unlawful. Further broad, blanket prohibitions can be dangerous when creating an enforceable employment agreement. Employers should consider having an attorney review any employment agreements to evaluate the terms for potential danger areas.