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Sixth Circuit: Arbitration Provisions Prohibiting Concerted Protected Activity are Unenforceable

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In National Labor Relations Board v. Alternative Entertainment, Inc., the Sixth Circuit court joined the Seventh and Ninth circuits in holding that mandatory arbitration provisions that contain class action waivers are unenforceable under the National Labor Relations Act (“NLRA”). The Second, Fifth, and Eighth circuit courts took the opposite opinion.

In Alternative Entertainment, Inc., employees were required to sign, as a condition of employment, a mandatory arbitration agreement containing a provision that barred employees from bringing collective actions against the employer. Alternative also prohibited employees from discussing wage information.

A former employee sued after he was terminated for repeatedly complaining about the company’s policies on compensation. The Sixth Circuit stated that Alternative’s arbitration agreement violated both the NLRA and the Federal Arbitration Act (“FAA”). In reaching this decision, the Sixth Circuit considered and refuted two arguments the Fifth Circuit made, finding that: (A) the NLRA does not override or conflict with the FAA; and (B) workers’ rights under the NLRA to pursue litigation in all forums qualifies as a substantive right protected by Section 7 of the NLRA.

Though the Sixth Circuit decision has further deepened the split in authority among circuit courts, the “final say” in this ongoing matter is still pending U.S. Supreme Court review. ManagEase will continue to report on this developing area of law.

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