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NLRB Slaps Domino’s Franchisee for Making Workers Waive Rights on Class Arbitration

An NLRB administrative law judge issued a decision this month stating a Domino's franchisee entity violated the National Labor Relations Act in requiring employees as a condition of employment to agree to pursue legal disputes with the restaurant owners in binding arbitration on an individual basis, waiving their rights to pursue class and collective legal action.

The charges were brought against Pizza the Pie, LLC and Becca Boo Pies, LLC on December 20, 2016. The pizza companies manage and operate public restaurants in Georgia and South Carolina and are owned by Greg Fox. The two companies were found by NLRB to be a single employer, deriving gross annual revenue in excess of $500,000 that purchased and received goods and materials valued in excess of $5,000 directly from points located outside of Georgia. The owner of the Domino's franchisee entity operates multiple restaurants in both states.

Henry Thomas Phillips, III, a pizza delivery driver for the company for almost seven years, brought the case to the labor board in 2016, filing an unfair labor practice charge against the franchisee companies, which was amended for the third time at the end of December. The complaint alleges that Pizza the Pie and Becca Boo Pies violated the Act by maintaining a mandatory arbitration policy that prohibits employees from pursuing multi-plaintiff, class, or collective claims about terms and conditions of employment in any forum, arbitral or judicial. The case also charges that his employer maintains a mandatory arbitration policy that interferes with employees' access to the Board's processes; and enforces provisions if the arbitration mandatory to compel arbitration on an individual basis to preclude adjudication of collective claims in any form.

Administrative Law Judge Elizabeth M. Tafe states that the primary question in the case is whether Pizza the Pie and Becca Boo Pies owner's arbitration agreement violates the National Labor Relations Act. She concurs that the agreement clearly and expressly bars employees from exercising the right to pursue collective-employment claims in all forums. But after her detailed analysis, Judge Tafe states that the NLRB's existing precedent is that arbitration agreements containing waivers are illegal, relying on two board decisions, D.R. Horton and Murphy Oil USA Inc., the latter currently on appeal before the U.S. Supreme Court, and that no ruling has yet been issued invalidating the NLRB's position. Judge Tafe concluded that she must apply the board's rationale from the two cases to the Domino's case, the instant case based on an unfair labor practice charge filed by the pizza delivery driver.

Phillips filed a wage and hour class action in Georgia federal court alleging that his employer's reimbursement practices for delivery drivers violated the minimum wage requirements of the Fair Labor Standard Act. The franchisee entity then enforced the arbitration agreement he had signed during his employment.

In her ruling, Judge Tafe declared, "Having found that Respondent [Pizza the Pie and Becca Boo Pies] engaged in unfair labor practices, I shall order it to cease and desist from such conduct and to take cert affirmative action designed to effectuate the policies of the Act." She said they must either rescind or revise their policy or make clear to employees that the arbitration agreement doesn't preclude them from pursuing collective actions or filing charges with the NLRB. And, as his employer, they must also reimburse Phillips for attorneys' fees related to his opposition of the franchisee company's request that his lawsuit be sent to arbitration.

The franchisee entity was also ordered to notify the district court in Georgia and the American Arbitration Association that it has rescinded or revised its arbitration agreement, and that it no longer opposes Phillips' FLSA action on that basis of the NLRB order.

Other high court legal battles regarding waivers

The other cases regarding the legality of class waivers, were reported by Law360 this month on the internet. It states that earlier this year the high court "agreed to take up the issue, granting certiorari in a trio of cases that ask whether arbitration agreements containing class waivers flout the NLRA."   As mentioned above, one the cases it agreed to hear is an appeal by the labor board of the Fifth Circuit ruling in the Murphy Oil, in which the appeals court overturned the labor board's invalidation of the company's arbitration agreements.

The U.S. Supreme Court also granted a petition for certiorari from Epic Systems Corp., a healthcare software systems company in Wisconsin, and Ernst & Young Big Four accounting firm, appealing decisions from the Seventh and Ninth Circuits, respectively.

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