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NLRB Judge finds 24 Hour Fitness arbitration clause violates federal labor law

An NLRB Administrative Law Judge has issued a decision finding that 24 Hour Fitness USA, Inc. maintained and enforced an unlawful arbitration policy that required employees to give up their federally protected rights to take concerted action.

The California-based corporation, which operates fitness centers across the country, required new employees to agree in writing to submit all employment-related claims to individual arbitration. Employees were also prohibited from discussing such claims with their co-workers.

The employee handbook advised employees they could opt out of the policy by taking a series of steps. However, Judge William L. Schmidt found that the provision was “an illusion” because the process was “convoluted” and because employees would be unable to identify others who had also opted out with whom they could discuss their case.

Judge Schmidt relied on the Board’s recent decision in DR Horton, which detailed Appellate and Supreme Court decisions dating back to the 1940s reaffirming the principle that “employers cannot enter into individual agreements with employees in which the employees cede their statutory rights to act collectively.”

He rejected the arguments of 24 Hour Fitness and the Chamber of Commerce, which filed an amicus brief in the case, 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 fitness center operator successfully pursued enforcement of the individual arbitration clause in at least eight lawsuits filed by employees at several California facilities alleging discrimination and wage and hour violations.

In his decision, Judge Schmidt ordered the company to remove the prohibition against class or collective actions from the employee handbook, and to notify all employees of the change. He also ordered 24 Hour Fitness to notify all arbitral or judicial tribunals where it has pursued enforcement of the clause that it desires to withdraw the request.

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