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National Labor Relations Board v. Alternative Entertainment, Inc.

United States Court of Appeals, Sixth Circuit

May 26, 2017

National Labor Relations Board, Petitioner,
Alternative Entertainment, Inc., Respondent.

          Argued: November 30, 2016

         On Application for Enforcement of a Final Decision and Order of the National Labor Relations Board. No. 07-CA-144404.


          Joel Heller, NATIONAL LABOR RELATIONS BOARD, Washington, D.C., for Petitioner. Timothy J. Ryan, JACKSON LEWIS P.C., Grand Rapids, Michigan, for Respondent.

          Harold Craig Becker, AFL-CIO, Washington, D.C., Evan M. Tager, MAYER BROWN LLP, Washington, D.C., for Amici Curiae.

         ON BRIEF:

          Linda Dreeben, Kira Dellinger Vol, Gregoire Sauter, NATIONAL LABOR RELATIONS BOARD, Washington, D.C., for Petitioner. Timothy J. Ryan, JACKSON LEWIS P.C., Grand Rapids, Michigan, for Respondent.

          Harold Craig Becker, AFL-CIO, Washington, D.C., Evan M. Tager, MAYER BROWN LLP, Washington, D.C., Michael Rubin, ALTSHULER BERZON LLP, San Francisco, California, for Amici Curiae.

          Before: MOORE, SUTTON, and WHITE, Circuit Judges.


          KAREN NELSON MOORE, Circuit Judge.

         Petitioner National Labor Relations Board (NLRB) seeks enforcement of a Decision and Order of the NLRB finding that Respondent Alternative Entertainment, Inc. (AEI) violated the National Labor Relations Act (NLRA). AEI seeks relief from the order. The NLRB argues that AEI violated the NLRA by barring employees from pursuing class-action litigation or collective arbitration of work-related claims. The NLRB also contends that AEI violated the NLRA by forbidding James DeCommer, an AEI technician, from discussing a proposed compensation change with his coworkers and by firing DeCommer for discussing the proposed change and complaining to management about it. For the reasons discussed below, we ENFORCE the NLRB's Decision and Order.

         I. BACKGROUND

         DeCommer worked as a field technician for AEI from August 2006 until he was fired on December 18, 2014. Administrative Record ("A.R.") (Hr'g Tr. at 13) (Page ID #19). AEI provides Dish Network installation and services. Id. at 87 (Page ID #93).

         Two AEI employment documents are at issue in this case. First, AEI requires its employees to sign an agreement entitled "AEI ALTERNATIVE ENTERTAINMENT, INC. OPEN DOOR POLICY AND ARBITRATION PROGRAM, " which states that "Disputes between you and AEI (or any of its affiliates, officers, directors, managers or employees) relating to your employment with the Company" must, at the election of the employee or the company, be resolved "exclusively through binding arbitration." A.R. ("Open Door Policy and Arbitration Program" at 1) (Page ID # 209). The agreement also states that "By signing this policy, you and AEI also agree that a claim may not be arbitrated as a class action, also called 'representative' or 'collective' actions, and that a claim may not otherwise be consolidated or joined with the claims of others." Id. Second, AEI maintains an employee handbook, which lists "examples . . . intended to demonstrate the types of behaviors prohibited by the company." A.R. (Employee Handbook at 27) (Page ID #196). Examples include "[u]nauthorized disclosure of business secrets or confidential business or customer information, including any compensation or employee salary information." Id. at 28 (Page ID #197).

         The central dispute in this case stems from changes in field technicians' compensation. AEI compensates technicians using a "unit-based compensation system." A.R. (Hr'g Tr. at 17) (Page ID #23). AEI assigns each type of job a certain number of units. For example, "a trouble call or a service call . . . would be considered 12 units, " and technicians receive compensation for each unit of work they perform. Id. Different technicians receive different per-unit compensation rates, ranging from approximately $1.90 per unit to approximately $4.00 per unit. Id. at 18 (Page ID #24). AEI determines each technician's per-unit compensation rate based on the technician's metrics, including factors like the number of jobs a technician completed, how frequently customers reported problems after a technician performed installations, and the technician's customer satisfaction ratings. Id.

         While DeCommer was employed at AEI, the company made two changes to the compensation structure. First, AEI added smart home service sales[1] as a metric for all technicians. Id. Smart home sales were additional services, such as mounting a customer's television on the wall or selling accessories to complement a customer's home entertainment system, that technicians sold during service calls. Id. at 20 (Page ID #26). AEI began requiring technicians to meet a minimum dollar amount of smart home service sales in order to increase their pay per unit (initially the threshold was $6.00 per call and it later increased to $10.00 per call). Id.

         At first, DeCommer excelled at smart home sales and in 2013 and 2014 he broke company records. Id. at 39, 48 (Page ID #45, 54). Later, he determined that he was losing money by spending time on smart home sales instead of going on more service calls, so his smart home sales numbers dropped off significantly. Id. at 40-41 (Page ID #46-47). There is some dispute about how DeCommer handled smart home sales after he stopped trying to break company records. DeCommer testified that he told his supervisor that he would continue to meet the minimum dollar amount in smart home sales but that he was no longer motivated to break records. Id. at 40-41 (Page ID #46-47). Specifically, he testified that he said, "I'll make sure I hit my goal. I'm not going to miss that, but I'm not going to be pushed to be number one every month. . . . I actually lost money by doing that." Id. at 40 (Page ID #46). DeCommer's supervisor, Victor Humphrey, testified that on or around December 17, 2014 DeCommer told him he would not do smart home sales and that "he made the comment . . . that he talks his customers out of services." Id. at 95-96 (Page ID #101-02). Humphrey testified that after hearing this comment he was "in shock . . . [b]ecause I had an employee that just refused to do his job to his boss." Id. at 96-97 (Page ID #102-03). DeCommer, however, denied that he had a conversation with Humphrey on December 17, and also denied ever refusing to do Smart Home Sales. Id. at 130 (Page ID #136).

         The second change affected compensation only for technicians who, like DeCommer, drove their own vehicles. A.R. (Hr'g Tr. at 14) (Page ID #20). AEI employs field technicians who drive personally owned vehicles (POV technicians or POVs) and field technicians who drive company owned vehicles (COV technicians or COVs). In November or December 2014, AEI announced it would begin compensating POVs for using their own vehicles based on mileage, not based on units. A.R. (12/15/2014 Email from Neal Maccoux) (Page ID #306); A.R. (Hr'g Tr. at 43) (Page ID #49). Under the old system, POVs received a supplement of $0.82 per unit to compensate them for the cost of driving their own vehicles. A.R. (Hr'g Tr. at 26) (Page ID #32). Under the new system, [2] POVs would be compensated $0.575 per mile[3]based on the miles driven from their first to their last job. A.R. (12/15/2014 Email from Neal Maccoux) (Page ID #306); A.R. (Hr'g Tr. at 43) (Page ID #49). DeCommer determined that he would "lose a lot of money" under this new system, estimating the change would cost him seven to ten thousand dollars per year, or about twenty percent of his total compensation. A.R. (Hr'g Tr. at 25, 26, 31) (Page ID #31, 32, 37).

         DeCommer repeatedly voiced his concern about the proposed compensation change. DeCommer testified that he spoke with "probably 10 technicians or more" about the change and "[t]hey were concerned that they were going to lose money, that this pay was going to stop their proper compensation of driving their vehicle." Id. at 23 (Page ID #29). DeCommer testified that he had an in-person conversation about the proposed change with manager Rob Robinson. DeCommer testified that he "asked [Robinson] if he knew anything more about the pay change" to which "[Robinson] said, why don't we talk outside, because there were some other technicians in that general office area. . . . [I]t was at that point that Mr. Robinson told me that I don't want you talking to any of the other technicians about this; if you have any concerns or questions, I want you to direct them to myself or Mr. Humphrey." Id. at 28 (Page ID #34). DeCommer also testified that he discussed with other technicians the contents of the conversation with Robinson. Id. In addition, DeCommer sent a text message to Robinson and an email to the company president, Tom Burgess, criticizing the proposed change. A.R. (12/5/2014 Text Message) (Page ID #212); A.R. (12/16/2014 Email from James DeCommer) (Page ID #213). In the email to Burgess, DeCommer discussed the impact on his personal compensation and the compensation of other POVs. DeCommer repeatedly referred to the POVs collectively, saying that "[g]enerally speaking the povs are the highest p[er]formers and the most profitable of your tech force" and that the change would "unintentionally screw over almost [the] entire pov tech force." A.R. (12/16/2014 Email from James DeCommer) (Page ID #213). He says of the impact on POVs, "what you are asking myself and all the other povs to do is to accept a 20% pay cut." Id. (Page ID #214-15). DeCommer also included a discussion of the tax implications for POVs with different filing statuses. Id. (Page ID #214). Finally, Robinson set up a telephone conversation on or around December 16, 2014 between DeCommer and company CFO Neal Maccoux where DeCommer again expressed his concerns. A.R. (Hr'g Tr. at 30) (Page ID #36). In that conversation, DeCommer explained to Maccoux that he had "talked with other employees and that they had done their own figures and found that they would lose quite a bit of money as well if this change were to go through." Id. at 32 (Page ID #38). DeCommer testified that he informed other technicians-"anywhere from 5 to 10" of them, "[p]robably closer to 10"-about the discussion with Maccoux. Id. at 36 (Page ID #42).

         AEI fired DeCommer on December 18, 2014. DeCommer testified that on December 18, General Manager Victor Humphrey said to DeCommer, "our relationship is not working out" and fired him. Id. at 38 (Page ID #44). DeCommer asked, "well, is it due to my job performance?" to which Humphrey responded, "no, our relationship is not working out." Id. Humphrey's testimony about their December 18 conversation mirrors DeCommer's, but Humphrey additionally testified that he made the decision to fire DeCommer the day before because DeCommer told Humphrey that he was not going to do smart home sales. Id. at 96-98 (Page ID #102-04). On the AEI Employee Separation Document, in response to "REASON FOR SEPARATION, " Humphrey wrote, "Relationship is not working out." A.R. (AEI Employee Separation Document) (Page ID #224). In response to the question, "DID THEY WORK TO THE BEST OF THEIR ABILITY?" Humphrey wrote, "No, Did not work to his potential in Smart Home Services consistently." Id. In response to "OTHER COMMENTS" Humphrey wrote, "Consi[s]tently had a bad attitude." Id.

         DeCommer filed charges and then amended charges against AEI with the NLRB. A.R. (First Amended Charge) (Page ID #147). The NLRB's General Counsel issued a complaint on March 26, 2015. A.R. (Compl. at 4) (Page ID #156). Administrative law judge (ALJ) Michael A. Rosas issued a recommended decision on July 9, 2015 finding that AEI violated the NLRA. A.R. (Decision & Order at 10-11) (Page ID #350-51); Alt. Entm't, Inc., 363 N.L.R.B. 131, 2016 WL 737010, at *5 (Feb. 22, 2016). On February 22, 2016, the NLRB, by Chairman Pearce and Members Miscimarra and McFerran, adopted the ALJ's findings of fact and legal analysis and adopted with amendments the ALJ's conclusions of law. Alt. Entm't, Inc., 2016 WL 737010, at *1. The amended conclusions of law stated:

(1) By (1) prohibiting James DeCommer from discussing his concerns over changes in compensation with coworkers; (2) implementing rules prohibiting unauthorized disclosure of employee compensation and salary information; and (3) compelling employees, as a condition of employment, to sign arbitration agreements waiving their right to pursue class or collective actions in all forums, arbitral and judicial, the Respondent has violated Section 8(a)(1) of the Act. . . .
(2) By discharging James DeCommer for engaging in protected activity, including discussing his concerns about salary, wages, or compensation structures with his coworkers and bringing complaints about those issues to management, the Respondent has violated Section 8(a)(1) of the Act.

Id. Member Miscimarra filed a separate opinion concurring in part and dissenting in part. Id. at *3. The NLRB filed an application for enforcement of the order on March 30, 2016.

         We have jurisdiction to review the NLRB's Decision and Order pursuant to 29 U.S.C. § 160(e), (f). We "review[] the factual determinations made by the NLRB under the substantial evidence standard." NLRB v. Local 334, Laborers Int'l Union, 481 F.3d 875, 878-79 (6th Cir. 2007). "The deferential substantial evidence standard requires this court to uphold the NLRB's factual determinations if they are supported by 'such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.'" Id. at 879 (quoting NLRB v. Pentre Elec., Inc., 998 F.2d 363, 368 (6th Cir. 1993)). "When there is a conflict in the testimony, 'it is the Board's function to resolve questions of fact and credibility, ' and thus this court ordinarily will not disturb credibility evaluations by an ALJ who observed the witnesses' demeanor." Turnbull Cone Baking Co. v. NLRB, 778 F.2d 292, 295 (6th Cir. 1985) (quoting NLRB v. Baja's Place, 733 F.2d 416, 421 (6th Cir. 1984)). We review the NLRB's application of the law to facts under the substantial evidence standard. Id. We review the NLRB's legal conclusions de novo; however, we defer to the NLRB's reasonable interpretation of the National Labor Relations Act. Local 334, 481 F.3d at 879; Lechmere, Inc. v. NLRB, 502 U.S. 527, 536 (1992) ("Like other administrative agencies, the NLRB is entitled to judicial deference when it interprets an ambiguous provision of a statute that it administers."); NLRB v. United Food & Commercial Workers Union, Local 23, 484 U.S. 112, 123 (1987) (applying Chevron deference to the NLRB's interpretation of the NLRA).


         The NLRB concluded that AEI violated the NLRA by maintaining a company policy requiring employees to agree that disputes "relating to . . . employment with the company" must be resolved "exclusively through binding arbitration" and further agreeing that "a claim may not be arbitrated as a class action, also called 'representative' or 'collective' actions" or "otherwise be consolidated or joined with the claims of others." A.R. ("Open Door Policy and Arbitration Program" at 1) (Page ID #209). The NLRB concluded that AEI's arbitration provision violated the NLRA because it prevents employees from taking any concerted legal action. Alt. Entm't, Inc., 2016 WL 737010, at *1, 5.

         An arbitration provision that, like AEI's, prevents employees from taking any concerted legal action implicates two federal statutes, the Federal Arbitration Act and the National Labor Relations Act. The Federal Arbitration Act, 9 U.S.C. §§ 1 et seq., states that arbitration agreements are "valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. The FAA "manifest[s]" a "liberal federal policy favoring arbitration agreements." Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 625 (1985). The FAA ensures that arbitration agreements are as enforceable as any other contract. Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443 (2006). The FAA does not, however, make arbitration agreements more enforceable than other contracts-"[a]s the 'saving clause' . . . indicates, the purpose of Congress . . . was to make arbitration agreements as enforceable as other contracts, but not more so." Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 n.12 (1967).

         Section 7 of the National Labor Relations Act, 29 U.S.C. §§ 151 et seq., states that, "Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection. . . ." 29 U.S.C. § 157. Section 8 states that, "It shall be an unfair labor practice for an employer . . . to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in section 157 of this title." 29 U.S.C. § 158. "[C]ontracts . . . stipulat[ing] . . . the renunciation by the employees of rights guaranteed by the [NLRA]" are "a continuing means of thwarting the policy of the Act." Nat'l Licorice Co. v. NLRB, 309 U.S. 350, 361 (1940). Contractual provisions that "illegal[ly] restrain[]" employees' rights under the NLRA are unenforceable. Id. at 360, 365.

         We must determine whether AEI's arbitration provision is enforceable under these federal statutes. Whether federal law permits employers to require individual arbitration of employees' employment-related claims is a question of first impression in this circuit; however, at least four other circuits have recently considered this question. See Morris v. Ernst & Young, LLP, 834 F.3d 975, 985-86 (9th Cir. 2016) (holding arbitration provisions mandating individual arbitration of employment-related claims violate the NLRA and fall within the FAA's saving clause); Lewis v. Epic Sys. Corp., 823 F.3d 1147, 1160 (7th Cir. 2016) (same); Murphy Oil USA, Inc. v. NLRB, 808 F.3d 1013, 1018 (5th Cir. 2015) (upholding its earlier holding in D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013), that arbitration provisions mandating individual arbitration of employment-related claims do not violate the NLRA and are enforceable under the FAA); Cellular Sales of Mo., LLC v. NLRB, 824 F.3d 772, 776 (8th Cir. 2016) (upholding its earlier holding in Owen v. Bristol Care, Inc., 702 F.3d 1050 (8th Cir. 2013), that arbitration provisions mandating individual arbitration of employment-related claims do not violate the NLRA).[4] The California Supreme Court also recently considered this question. See Iskanian v. CLS Transp. Los Angeles, LLC, 327 P.3d 129, 141-43 (Cal. 2014) (holding that arbitration provisions banning class-action litigation or collective arbitration of employment-related claims are enforceable under the NLRA and the FAA's saving clause, but also holding that arbitration provisions banning representative claims under California's Private Attorneys General Act violates that Act). There were dissenting opinions in three of these cases. See Morris, 834 F.3d at 990 (Ikuta, J., dissenting); D.R. Horton, 737 F.3d at 364 (Graves, J., dissenting in part); Iskanian, 327 P.3d at 159 (Werdegar, J., dissenting in part). Although this question is one of first impression in this circuit, there is already a robust debate about the enforceability of arbitration provisions like the one at issue in this case.

         AEI (and the Chamber of Commerce of the United States, arguing as amicus) urge us to follow the Fifth Circuit's reasoning in D.R. Horton, which held that a similar arbitration provision was enforceable. See 737 F.3d at 362. We determine that the Fifth Circuit reached the incorrect conclusion, and we decline to follow it.

         The Fifth Circuit based its decision on two principles. First, it determined that the NLRA does not "override" the FAA. Id. at 360; cf. CompuCredit Corp. v. Greenwood, 565 U.S. 95, 98 (2012). But by asking at the outset whether "the policy behind the NLRA trumped the different policy considerations in the FAA that supported enforcement of arbitration agreements, " D.R. Horton, 737 F.3d at 358, the Fifth Circuit started with the wrong question. Instead of beginning by asking which statute trumps the other, it makes more sense to start by asking whether the statutes are compatible. "When addressing the interactions of federal statutes, courts are not supposed to go out looking for trouble." Lewis, 823 F.3d at 1158. Instead, "[b]efore we rush to decide whether one statute eclipses another, we must stop to see if the two statutes conflict at all." Id. at 1156 (citing Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528, 533 (1995)); see also Morton v. Mancari, 417 U.S. 535, 551 (1974) ("The courts are not at liberty to pick and choose among congressional enactments, and when two statutes are capable of co-existence, it is the duty of the courts, absent a clearly expressed congressional intention to the contrary, to regard each as effective.").

         Starting with the right question reveals that there is no need to ask whether the NLRA trumps the FAA. The two statutes do not conflict. The NLRA and FAA are compatible because the FAA's saving clause addresses precisely the scenario before us. The NLRA prohibits the arbitration provision on grounds that would apply to any contractual provision, and thus triggers the FAA's saving clause. Because of the FAA's saving clause, the statutes work in harmony.

         The core right that § 7 of the NLRA protects is the right "to engage in . . . concerted activities for the purpose of collective bargaining or other mutual aid or protection." 29 U.S.C. § 157. Concerted activity includes "resort to administrative and judicial forums." Eastex, Inc. v. NLRB, 437 U.S. 556, 565-66 (1978); see also NLRB v. City Disposal Sys., Inc., 465 U.S. 822, 835 (1984) ("[I]n enacting § 7 of the NLRA, Congress sought generally to equalize the bargaining power of the employee with that of his employer by allowing employees to band together . . . . There is no indication that Congress intended to limit this protection to situations in which . . . fellow employees combine with one another in any particular way."); Brady v. Nat'l Football League, 644 F.3d 661, 673 (8th Cir. 2011) ("[A] lawsuit filed in good faith by a group of employees to achieve more favorable terms or conditions of employment is 'concerted activity' under § 7 of the National Labor Relations Act."); SolarCity Corp., 363 N.L.R.B. 83, 2015 WL 9315535, at *2 (Dec. 22, 2015) ("This protection has long been held to encompass the right of employees to join together to improve their terms and conditions of employment through litigation. Accordingly, an employer violates Section ...

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