Main Menu
Fitness Center’s Employee Arbitration Policy Deemed Unfit for Class

On Nov. 6, 2012 an Administrative Law Judge (ALJ) for the National Labor Relations Board (Board) ruled that an employee arbitration policy, which purported to prohibit class actions by employees who did not opt out, violated the National Labor Relations Act.  Consequently, the ALJ found that the employer had engaged in an unfair labor practice.

On Nov. 6, 2012 an Administrative Law Judge (ALJ) for the National Labor Relations Board (Board) ruled that an employee arbitration policy, which purported to prohibit class actions by employees who did not opt out, violated the National Labor Relations Act.  Consequently, the ALJ found that the employer had engaged in an unfair labor practice.

24 Hour Fitness USA Inc. (24 Hour Fitness) has more than 400 fitness clubs in 17 states and has been sued by employees who sought to certify class and/or collective actions.  As a defense to those suits, 24 Hour Fitness has invoked an arbitration policy in its employee handbook which purports to prohibit most employees from filing class and collective actions.  The Handbook provided as follows:

[T]here will be no right or authority for any dispute to be brought, heard or arbitrated as a class action (including without limitation opt out class actions or opt in collective class actions), or in a representative or private attorney general capacity on behalf of a class of persons of the general public.

Despite this provision, former employee Alton Sanders (Sanders) recently sought to join a race and sex discrimination case filed against 24 Hour Fitness by another employee.  In response, 24 Hour Fitness asserted that Sanders must pursue his discrimination case in an individual lawsuit and could not join the other employee’s lawsuit.  Sanders disagreed and filed an unfair labor practice charge, with the assistance of the Board’s acting General Counsel.

24 Hour Fitness responded to the General Counsel’s Complaint by arguing that the class action waiver in Sanders’ employee handbook did not violate federal labor law or a prior ALJ decision in a similar case, because its class action waiver was not mandatory.  24 Hour Fitness noted that its handbook allowed employees to “opt-out” of the class action waiver within 30 days of the start of their employment.  Although 70 of 24 Hour Fitness’ 20,000 employees had previously opted out, Sanders did not.  Therefore, 24 Hour Fitness concluded that Sanders, through inaction, voluntarily agreed to the class action waiver and should be bound to its terms.

After a hearing on the issue, the ALJ ruled that the class action waiver violated Section 8(a)(1) of the National Labor Relations Act.  The ALJ reasoned that “[t]he requirement that employees must affirmatively act to preserve rights already protected by Section 7 through the opt-out process is … an unlawful burden on the right of employees to engage in collective litigation that may arise in the future.”  To remedy this purported interference with employee rights, the ALJ ordered 24 Hour Fitness to notify all of the courts and arbitral forums where the policy has been invoked that 24 Hour Fitness no longer objects to employees commencing or participating in class or collective litigation.

It is not currently known whether 24 Hour Fitness will appeal the ruling by the ALJ to the Board.  Nevertheless, the decision signifies an increasing willingness by the Board’s General Counsel to target non-union employers for potential violations of federal labor laws.  As always, union and non-union employers should have the language in employment policies and handbooks reviewed by labor and employment counsel.  For the immediate future, the NLRB will continue with its aggressive enforcement against both union and non-union employees.

If you need assistance drafting employment policies or handbooks, or advice concerning lawsuits or arbitrations, please contact one of the attorneys in our Labor and Employment Practice Group.

  • Partner

    Ben Lewis is the Co-Chair of the Fiduciary Litigation Practice Group. He focuses his practice on complex business litigation matters, particularly disputes involving breach of fiduciary duty claims against trustees ...

RSS RSS Feed

Subscribe

Recent Posts

Categories

Contributors

Archives

Back to Page