24 Hour Fitness Arbitration Agreement Defeated Before Federal Agency

01/18/2013 // Los Angeles, CA, USA // Keller Grover LLP // LA lawyer Eric Grover // (press release)

Los Angeles, C.A.—A chain of fitness centers has been dealt a blow by the National Labor Relations Board (NLRB), where an Administrative Law Judge (“ALJ”) ruled that 24 Hour Fitness USA Inc. committed unfair labor practices by maintaining and enforcing a mandatory arbitration agreement for its new hires, waving their rights to participate in class or collective actions in disputes with their employer, reports Los Angeles employment lawyer Eric Grover.

The Bureau of National Affairs reported that because 24 Hour Fitness enforced a waiver to compel arbitration, even though the company allowed a 30-day period during which employees could opt out of the company’s dispute resolution procedure, they were in violation of Section 8(a) (1) of the National Labor Relations Act (“NLRA”).

The ALJ maintained that the opt-out process creates “an unlawful burden on the right of employees to engage in collective action that may arise in the future.”

The complaint was brought by former employee Alton Sanders, who applied for work in August 2008, and began working for 24 Hour Fitness in October as an exercise instructor, continuing his employment for about two years. As part of the hiring process, Sanders signed the employment contract, which stated that if he were hired he would submit employment disputes to binding arbitration. Although the application form mentioned an opt-out procedure, no further details were supplied.

Sanders continued with an “on-boarding” process and signed for an employee handbook, which stated in part that he would be bound by the employer’s “Arbitration of Disputes” policy if he did not complete and turn-in an opt-out form within 30 days. Sanders did not complete and submit the form.

According to 24 Hour Fitness’ arbitration policy, in part, “there will be no right to 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 representation or private attorney general capacity on behalf of a class of persons of the general public.”

Sanders later attempted to join a race and sex discrimination claim in non-class litigation, prompting the ALJ to conduct a hearing on the complaint in June.

The board determined that the mandatory arbitration policy is in violation of Section 8(a)(1) of the NLRA, because it kept employees from bringing collective or class claims in any venue, whether in a courtroom or in an arbitral forum.

“The requirement that employees must affirmatively act to preserve rights already protected by Section 7 through an opt-out process is as the Acting General Counsel argues, an unlawful burden on the right of employees to engage in collective litigation that may arise in the future,” the ALJ asserted. “Board precedent establishes that employees may not be required to prospectively trade away their statutory rights.”

Because 24 Hour Fitness has invoked the arbitration agreement in several class and collective actions in the past, the ALJ also ordered that 24 Hour Fitness notify all of the courts and arbitral forums where the policy has been invoked. Under this order, 24 Hour Fitness must alert the courts that they no longer objects to employees commencing or participating is class or collective litigation.

24 Hour Fitness intends to appeal the order to the National Labor Relations Board.

Click here for more reading on mandatory arbitration clauses: CFPB Launches Study Into Mandatory Arbitration, Bringing Discussion To Congress

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