Ralph’s class action waiver ruled unenforceable

September 4, 2013 by

Blog Wage and HourA National Labor Relations Board judge on Wednesday ruled that Ralph’s Grocery Co. ran afoul of federal labor law by subjecting its employees to a mandatory arbitration policy that prohibits class proceedings, in keeping with the labor board’s controversial D.R. Horton decision.

Administrative Law Judge Eleanor Laws acknowledged the grocery chain’s arguments that the NLRB lacked a quorum when it decided D.R. Horton, which held that it is a violation of federal labor law for an employer to impose as a condition of employment a mandatory arbitration agreement that precludes employees from bringing class claims in any forum. However, the judge stated that she was bound to follow the board’s ruling and that it directly applied to whether Ralph’s arbitration policy passed muster under the National Labor Relations Act.

Judge Laws found that adherence to Ralph’s arbitration policy is a condition of employment because it is deemed accepted by an applicant upon submitting an application and by an employee upon acceptance or continuation of employment.

And the four-page company policy included provisions requiring employees to resolve employment-related disputes exclusively through individual arbitration proceedings and to relinquish any right to resolve such disputes through collective or class action, the judge’s decision said.

As such, Judge Laws concluded that the grocery chain’s policy, like the arbitration agreement at issue in D.R Horton, violated the NLRA.

The judge further rejected Ralph’s claims that the D.R. Horton decision conflicts with recent pro-arbitration U.S Supreme Court precedents, saying the board had addressed similar arguments and nonetheless found that imposing a class waiver on employees interfered with their right to engage in protected, concerted activity for their mutual benefit.

In addition to finding that the policy could not stand in light of the D.R. Horton decision, Judge Laws also determined that Ralph’s arbitration policy could be interpreted by employees as precluding them from filing unfair labor practice charges with the NLRB.

Despite the policy containing a sentence explicitly stating that all employees retain the right to file charges with the board, Judge Laws found that the policy was confusing because it did not list board charges among the types of disputes excluded from the policy and because scenarios that could lead to the filing of charges with the board were listed among the examples of disputes covered by the policy.

She also ruled that a provision of the policy requiring employees to keep confidential the existence, content and outcome of all arbitration proceedings violated the NLRA because employees could interpret it as barring them from discussing with their co-workers the existence or substance of an arbitration regarding their terms or conditions of employment.

“Under the [policy], employees are not only precluded from proceeding together in arbitration, they are precluded by the confidentiality provision from even telling each other they have initiated individual arbitration proceedings,” the judge’s decision said.

Judge Laws recommended that the company be ordered to revise or rescind the policy.

The question of the policy’s lawfulness reached the judge after Terri Brown, a security guard for Ralph’s, filed a proposed class action and representative Private Attorney General Act lawsuit in California state court accusing the company of failing to pay wages for missed lunch and rest breaks. Ralph’s moved to compel individual arbitration of Brown’s claims pursuant to the policy, but an appeals court ultimately held that the right to bring a representative PAGA claim could not be waived.

Whether PAGA claims can be waived is currently a question before the California Supreme  in a different case, and Brown’s case has landed back at the appeals court where Ralph’s is trying to get a renewed motion to compel arbitration approved.

The case is Ralphs Grocery Co., The Kroger Co., case number 21–CA–073942, before the National Labor Relations Board.

Steve Larson
An experienced trial lawyer who handles both hourly and contingent fee cases, Steve has expertise in class actions, consumer cases, antitrust litigation, securities litigation, corporate disputes, intellectual property disputes, unfair competition claims, employment matters, and disputes involving family wealth. Steve regularly represents individuals and businesses in federal and state court and has obtained class-wide recovery in multiple class actions. A veteran practitioner, Steve's clients value his creative approach to resolving complex litigation matters.

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