The exercise chain, 24-Hour Fitness USA, can’t use mandatory arbitration terms to ban employees from filing job-related class actions or impose nondisclosure restrictions on individual arbitration decisions, a National Labor Relations Judge said last week.
The decision called the company’s ban on class actions unlawful and provisions for employees to opt out of mandatory arbitration “illusory.”
NLRB Administrative Law Judge William L. Schmidt ripped 24-Hour Fitness in a Nov. 6 decision, stemming from a California case. The fitness centers’ “arbitration policy unlawfully requires its employees to surrender core Section 7 [organizing] rights by imposing significant restraints on concerted action regardless of whether the employee opts to be covered by it or not.”
The 24-Hour Fitness policy appeared to be an attempt to push into the employment arena the mandatory arbitration terms and class action bans approved in consumer cases by a 2011 U.S. Supreme Court decision called AT&T Mobility v. Concepcion.
But Schmidt was having none of it.
Concepcion, and a similar case called CompuCredit v. Greenwood, “have little, if anything, to do with arbitration in the context of the employer-employer (sic) relationship.”
Neither case address the fundamental question of whether the Federal Arbitration Act “may be used as a tool to alter, by way of private ‘agreements’ that are in large measure imposed unilaterally by employers, the fundamental substantive rights of workers established by decades old congressional legislation,” Schmidt wrote.
The company has 20,000 employees serving three million club members. The company said in a review of 20,000 personnel files, in a universe of 70,000 files, no more than 70 employees successfully opted-out of the mandatory arbitration policy enacted in 2007.
Even for the employees who did opt-out of arbitration, they were required to maintain confidentiality terms and could not disclose the outcome of their own individual arbitrations. That gave the company, which would know all the arbitration outcomes, an unfair upper hand, according to Schmidt.
The dispute began when Alton Sanders, an exercise instructor in clubs in Marin and Sonoma counties, tried to join in race and sex discrimination class action against the company in Alameda County Superior Court. He was told he have waived that right by failing to opt-out of the mandatory arbitration terms in his employment agreement within 30 days after he was hired.
The terms of the 60-page employee handbook includes a warning that whether or not they sign a receipt form for the handbook, the policies will apply to them, including the class action ban and arbitration requirement.
Schmidt pointed out that 24-hour Fitness faced eight various class actions alleging discrimination and wage and hour violations around the country, including Alameda County, Orange County and Los Angeles County state courts in California, as well as federal court in San Francisco, two in the Southern District of Florida, one in the Southern District of Texas.
It also sought to enforce its class action bans in three California cases, two in Orange County and one in San Bernardino County.
Schmidt rejected the arguments of 24-Hour fitness and amicus arguments by the Chamber of Commerce, saying they wished “to establish an employer’s right to restrict employees, in order to hold a job, from exercising their statutory right to use the full-range of legal remedies generally available to all citizens.”
The company was ordered to remove the ban on class or collection actions from the employee handbook and notify all employees of the change and notify arbitration bodies and judges where it pursued enforcement of the clause that it will withdraw the request.
Case: 24-Hour Fitness USA, Inc. v. Sanders, No. 20-CA-035419