Hoteliers navigate tricky class-action waiver landscape

We often imagine the rule of law as something rigid or set in stone, but in reality it is anything but. Case in point, the National Labor Relations Board, the organization in charge of maintaining a balance between the powers of the employer and the rights of the employee, is in the process of walking back a number of Obama-era decisions regarding employment law. During the previous administration, the NLRB decided that class-action waivers in arbitration cases were not enforceable, but a new decision from the NLRB could be taking the opposite stance.

Class-action waivers are often signed by employees when they are hired, exempting their right to participate in class-action lawsuits against their employer. The Obama-era NLRB had strict restrictions on how these waivers could be presented to employees, as well as the consequences of their signing, but the new Republican majority in the NLRB has taken a more pro-business approach. Oral arguments on walking back these restrictions have already been put forth before the Supreme Court, and a decision on the matter is expected to be made within weeks.

Because the decision is still up the air, and it will have far-reaching consequences for employers and employees alike, Mark Spring, principal at labor, employment and immigration law firm Carothers, DiSante & Freudenberger, recommends employers wait before presenting new contracts to employees.

"If you're already using an arbitration agreement, just continue doing what you're doing," Spring said. "The decision may set some parameters as to what's going to work and what isn't, and could offer guidelines on how to make these agreements enforceable."

Hook, Line...

Once the rules are in place, employers will be faced with the difficulty of convincing existing employees to sign. Dana Kravetz, managing partner at law firm Michelman & Robinson, said new hires can be bound to these agreements as a condition of new employment, but existing employees may need additional considerations.

"If you are trying to get existing employees to sign off or amplify an agreement with new language, you may have to give them something and some may say no," Kravetz said. "These are waivers to a trial by jury, and there is a certain consideration there to get employees to sign them."

In many cases, Kravetz said, employers make the mistake of implying or outright stating that continued employment is justification enough for workers to sign these agreements, but this line of thinking is unlikely to hold up in court. To sidestep this, Don Schroeder, partner at law firm Foley & Lardner, said it may be a good idea to time the signing of new employee contracts with other events, such as promotions, raises or bonuses.

Springing a class-action waiver on existing employees out of the blue may not be a great idea, so it may be better to wait for a milestone such as a review, promotion or bonus. Photo credit: Getty Images/Fizkes

"A lot of times, companies will set up an online portal to ensure employees consent to these new rules, and that is appropriate," Schroeder said. "Even an online signature is valid, as long as it ensures the employees have a clear understanding how the portal works and they acknowledge what they sign, and it allows companies to keep a record of it."

Schroeder said one of the major mistakes hotels make is failing to draft arbitration provisions that make it very clear what claims are included under the umbrella of the arbitration clause. He said that many small and midsized businesses make the mistake of lifting agreements from online and circulating them to employees, when these agreements may have been drafted more than a decade ago.

"It's very critical for companies operating in multiple jurisdictions that they include provisions that are clear as to what is and isn't covered by claims going forward, and for each region as well," Schroeder said.

Give and Take

Spring said there are negatives to the rule reversal, as well. Typically, an employer would not be expected to pay to provide an attorney for its employees during a class-action lawsuit, but that may not be the case if they are taken to court for a grievance that may have been addressed in such a suit. Also, Spring said employers are going to have to weigh the possibility of having to fire good, long-time employees who are unwilling to sign new agreements.

"There is no hard and fast rule behind this, but if you have an employee with 15 years behind them, and they are one of your best, and they don't want to sign is it worth it to fire them?" Spring said. "You want to do that then in a way that is enforceable by both state and federal law, and in a way that doesn't affect employee morale."

With decisions such as these becoming more common, Kravetz said he isn't surprised to see multiple hotel companies updating their employee handbooks. The response from unions and employee organizations cannot be ignored either, and employees are increasingly more educated on employment law.

"There is a bill being floated right now that would cause claims related to sexual harassment to not be subject to arbitration," Kravetz said. "Employers could find resistance to people signing class-action waivers in light of their awareness of this bill, and it's part of an inherent distrust of employers that creeps up when asked to sign something like this."