NLRB Rejects Employees’ Request to Withdraw ULP Charge After $900,000 Settlement with Employer.

There may be a growing trend in which employees’ attorneys file claims in multiple forums, including the National Labor Relations Board (the “Board”) as a way of escalating the employer’s costs and so increasing the company’s incentives to reach an early settlement.  This tactic depends, in the long run, on the employees’ ability to withdraw those claims as a term of any eventual agreement.  A recent decision by the Board suggests that charges of unfair labor practices (“ULPs”) are becoming harder to withdraw, and that the Board may continue to prosecute an alleged violation even after the employees have declared themselves satisfied with the employer’s settlement offer.  If this pattern continues, employers should exercise care when settling litigation where a concurrent dispute is being litigated before the Board; where ULP charges are involved, the employees may not be in a position to offer resolution of pending administrative claims.

In July 2013, employees of Flyte Tyme Worldwide filed a class action lawsuit in New Jersey federal court alleging violations of the Fair Labor Standards Act (“FLSA”).  After the employer sought to enforce its mandatory arbitration policy requiring employees to individually arbitrate any such claims, the employees’ attorney filed a ULP charge with the Board (Case No. 04-CA-115437) alleging that the employer’s arbitration policy violated the Board’s holding in D.R. Horton, 357 NLRB No. 184 (2012), that requiring employees to waive their right to participate in class action litigation violated employees’ right to engage in concerted activity regarding their terms and conditions of employment.  (Many federal courts have rejected this holding, but the Board has indicated that it will persist in its interpretation unless reversed by the Supreme Court.)

An Administrative Law Judge found the employer’s arbitration policy unlawful under D.R. Horton, and, among other remedies, ordered the employer to withdraw the motion pending in federal court to compel arbitration of the FLSA claims.  The employer appealed this decision to the Board.  Meanwhile, in August 2014, the employer and employees settled the FLSA class action.  As part of the settlement, the employer agreed to pay the employees $900,000, and the employees agreed to waive any right to monetary recovery in connection with the ongoing ULP and to request withdrawal of their pending ULP charge before the Board.  The employer’s monetary obligations, however, were not contingent on the Board’s approval of the plaintiffs’ request.  Although both the employer and employees considered their dispute resolved, the Board – unfortunately for the employer – disagreed.

On Monday, March 30, the Board issued a decision rejecting the employees’ request to withdraw their charge, and indicated that it would consider the employer’s appeal.  Despite the fact that the parties ostensibly agreed to resolve the ULP as part of their settlement, the Board found that the settlement agreement did not adequately “address the public interest in protecting employees’ statutory right to engage in collective action,” because it did not require the employer to abandon its mandatory class action waiver policy or otherwise modify existing employees’ waivers.  As such, the Board found that, because the mandatory arbitration policy would “continue to have a chilling effect” on protected employee activity, approving the request for withdrawal would not “effectuate the purposes of the Act.”

In conjunction with its recent decision in Babcock (discussed in more detail here), the Board’s ruling in Flyte Time Worldwide should serve as a cautionary tale for employers and their counsel in negotiating the settlement of employment claims accompanied by a pending ULP charge, and crafting the text of any resulting agreement.  In particular, employers should bear in mind that a promise to seek withdrawal of an administrative claim as a condition of settlement, by itself, may carry limited value, and they should ensure that settlement language suitably protects their interest in curbing prospective litigation expenses.