KO Huts, Inc.

National Labor Relations Board - Administrative Judge Opinions

Apr 20, 2016

14-CA-164874 (N.L.R.B. Apr. 20, 2016)

JD–35–16
Wichita, KS
UNITED STATES OF AMERICA
BEFORE THE NATIONAL LABOR RELATIONS BOARD
DIVISION OF JUDGES
KO HUTS, INC.
and Case 14–CA–164874
MICHAEL TIFFANY,
An Individual
Kathy J. Talbott-Schehl, Esq., for the General Counsel.
Forrest T. Rhodes, Jr., Esq. (Foulston Siefkin LLP, Wichita, Kansas)
for the Respondent.
Mark A. Potashnick, Esq. (Weinhaus & Potashnick), St. Louis, Missouri,
for the Charging Party.
DECISION
STATEMENT OF THE CASE
Arthur J. Amchan, Administrative Law Judge. This case was submitted to me on a
stipulated record dated March 14, 2016. Michael Tiffany filed the charge giving rise to this
matter on November 23, 2015. The General Counsel issued a complaint on February 16, 2016.
The issue in this case is whether Respondent violated Section 8(a)(1) of the Act by:
requiring all prospective employees to sign as a condition of employment a document titled “KO
Huts, Inc. Agreement to Arbitrate;” maintaining and enforcing this Agreement as a condition of
employment; defending the Charging Party’s class action lawsuit by moving to stay that
proceeding and compel individual arbitration of his claims.
Essentially the issues herein are those considered by the Board in D. R. Horton, Inc., 357
NLRB No. 184 (2012) enf. denied in relevant part 737 F. 3d 344 (5th Cir. 2013) and reaffirmed
by the Board in Murphy Oil USA, Inc., 361 NLRB No.72 (2014) enf. denied in relevant part 808
F.3d 1013 (5th Cir. 2015).
After considering the briefs filed by the General Counsel and Respondent, I make the
following
JD–35–16
2
FINDINGS OF FACT
I. JURISDICTION
Respondent is a Kansas corporation, which had an office in Wichita, Kansas and operates 5
a number of Pizza Hut restaurants in Kansas and Oklahoma. In the 12 months ending January31,
2016, Respondent derived gross revenues in excess of $500,000. It purchased and received
goods valued in excess of $50,000 directly from points outside of Kansas at its Kansas facilities.
It purchased and received goods valued in excess of $50,000 directly from points outside of
Oklahoma at its Oklahoma facilities Respondent admits, and I find, that it is an employer 10
engaged in commerce within the meaning of Section 2(2), (6), and (7) of the Act. Respondent’s
employees are not represented by a labor organization.
II. ALLEGED UNFAIR LABOR PRACTICES
15
On May 26, 2015, Michael Tiffany, the Charging Party completed and submitted new
hire paperwork to Respondent, which included the following “Agreement to Arbitrate.”
KO Huts, Inc. Agreement to Arbitrate
20
KO Huts, Inc. (KOHI), on behalf of itself and its parents and affiliates, officers and
directors (collectively, "KOHI") and I agree to use binding arbitration, instead of going to
court, for any claims, including any claims now in existence or that may exist in the
future (a) that I may have against KOHI, its affiliates, and/or their current or former
employees or (b) that KOHI and/or its affiliates may have against me. Without limitation, 25
such claims include any concerning wages, expense reimbursement, compensation, leave,
employment (including, but not limited to, any claims concerning harassment,
discrimination, or retaliation), conversion, breach of fiduciary duty, and/or termination of
employment. This Agreement to Arbitrate shall be governed by the Federal Arbitration
Act, 9 U.S.C. § 1 et seq. Nothing in this Agreement to Arbitrate shall prohibit me from 30
filing, participating in, or pursuing action with an administrative agency in accordance
with applicable law, including the filing of charges or claims with the National Labor
Relations Board or the Equal Employment Opportunity Commission, or the filing of a
workers' compensation claim or unemployment claim with an applicable state agency. In
any arbitration, the American Arbitration Association ("AAA") will administer the 35
arbitration, and the then prevailing employment dispute resolution rules of the American
Arbitration Association will govern, except that (a) KOHI will pay the arbitrator's fees;
(b) KOHI will pay the arbitration filing fee; and (c) as discussed below, the arbitration
shall occur only as an individual action and not as a class, collective, representative,
private attorney general action or consolidated action. The rules are available for review 40
at www.adr.org or can be sent to you by the Home Office.
KOHI and I agree that any and all claims subject to arbitration under this Agreement to
Arbitrate may be instituted and arbitrated only in an individual capacity, and not on
behalf of or as a part of any purported class, collective, representative, 45
private attorney general action, or consolidated action (collectively referred to in this
Agreement to Arbitrate as a ''Class Action"). Furthermore, KOH1 and I agree that neither
JD–35–16
3
party can initiate a Class Action in court or in arbitration in order to pursue any claims
that are subject to arbitration under this Agreement to Arbitrate. Moreover, neither party
can join a Class Action or participate as a member of a Class Action instituted by
someone else in court or in arbitration in order to pursue any claims that are Subject to
arbitration under this Agreement to Arbitrate. It is the parties' intent to the fullest extent 5
permitted by law to waive any and all rights to the application of Class Action procedures
or remedies with respect to all claims subject to this Agreement to Arbitrate. It is
expressly agreed between KOHI and me that any arbitrator adjudicating claims under this
Agreement to Arbitrate shall have no power or authority to adjudicate Class Action
claims and proceedings. The waiver of Class Action claims and proceedings is an 10
essential and material term of this Agreement to Arbitrate, and KOHI and I agree that if it
is determined that it is prohibited or invalid under applicable law, then this entire
Agreement to Arbitrate is unenforceable.
All issues are for the arbitrator to decide, except that issues relating to arbitrability, the 15
scope or enforceability of this Agreement to Arbitrate, or the validity, enforceability, and
interpretation of its prohibitions of class and representative proceedings, shall be for a
court of competent jurisdiction to decide.
I acknowledge and agree that this Agreement to Arbitrate is made in exchange for my 20
employment or continued employment, as well as the mutual promises to resolve disputes
through arbitration contained in this Agreement. This Agreement to Arbitrate is not and
shall not be construed to create any contract of employment, express or implied. This
Agreement to Arbitrate does not in any way alter the "at-will" status of employment with
KOHI, meaning that either I or KOHI may terminate the employment relationship at any 25
time, with or without advance notice, and with or without cause.
I understand that, by entering into this Agreement to Arbitrate, I am waiving my right to
a jury trial and any right I may have to bring any employment-related claim
covered by this agreement as a Class Action (as defined herein) or any class or 30
representative action (either in court or in arbitration) or to participate in such an
action.
This Agreement to Arbitrate supersedes any and all prior agreements to arbitrate entered
into between me and KOHI.35
All prospective employees at Respondent’s restaurants, including the Enid, Oklahoma
restaurant were and are required to complete and sign new hire paperwork which includes the
Agreement to Arbitrate. No applicant may be hired and no employee may retain employment
without signing the Agreement to Arbitrate.40
Respondent hired Michael Tiffany on or about May 26, 2015 as a delivery driver at its
Enid, Oklahoma restaurant. On about July 10, 2015, Tiffany’s position changed from delivery
driver to dough preparer at the Enid restaurant.
45
On October 21, Michael Tiffany filed a collective civil action under the Federal Fair
Labor Standards Act and a class action under the Oklahoma Minimum Wage Act against the
JD–35–16
4
Respondent in the United States District Court for the Western District of Oklahoma. He seeks
to recover unpaid wages allegedly owed to himself and all similarly situated delivery driver
employees by Respondent. The essence of Tiffany’s claim is that Respondent, by allegedly
inadequately reimbursing him by mileage when delivering pizzas, in effect was paying him
wages below the minimum wage.5
Respondent filed an Answer and Counterclaim for Declaratory Judgment. It sought a
proposed order staying Tiffany’s lawsuit and compelling individual arbitration of his claims.
Two days later, on November 19, 2015, Respondent filed a motion to compel arbitration and stay
Tiffany’s claims, relying on the fact that Tiffany signed its Arbitration Agreement. On April 15, 10
2016, the United States District Court granted KO Huts’ motion to compel arbitration.
Analysis
The Board held in Murphy Oil USA, Inc., 361 NLRB No. 72 (2014) and D.R. Horton, 15
357 NLRB 2277 (2012) that an employer which maintains a mandatory arbitration agreement
that they would reasonably believe bars them from filing charges with the National Labor
Relations Board and by maintaining and/or enforcing a mandatory arbitration agreement under
which employees are compelled as a condition of employment, to waive the right to maintain
class or collective actions in all forums, whether arbitral or judicial, has engaged in unfair labor 20
practices affecting commerce within the meaning of the Act and has violated Section 8(a)(1) of
the Act.
The Board also held that an employer, as did Respondent in this case, violates Section
8(a)(1) in seeking to dismiss a collective FLSA action and to compel individual arbitration, 25
Murphy Oil, supra; Cowabunga, Inc., 363 NLRB No. 133 (Feb. 26, 2916). The Charging Party,
Michael Tiffany engaged in protected concerted activity by filing a collective civil action under
the FLSA and the Oklahoma Minimum Wage Statute. This is so regardless of whether he
consulted with other employees. The potential of his suit to initiate or to induce or prepare for
group action renders his filing protected pursuant to Section 7, Beyoglu, 362 NLRB No. 152 30
(2015).
The Board’s view regarding employer attempts to compel individual arbitration was
rejected by the Fifth Circuit in D.R. Horton v. NLRB, 737 F. 3d 344 (5th Cir. 2013) and Murphy
Oil USA, Inc., 808 F.3d 1013 (5th Cir. 2015) and also by the Second and Eighth Circuit Court of 35
Appeals. In the Murphy Oil decision the Board reaffirmed its holding in D.R. Horton not
withstanding its adverse reception in the courts of appeals. Footnote 17 of the Murphy Oil
decision cites to case law holding that the Board is not required to acquiesce in adverse decisions
of the Federal courts in subsequent proceedings not involving the same parties. Only the
Supreme Court is authorized to interpret the Act with binding effect throughout the whole 40
country. The Board is not obliged to accept the interpretation of any court of appeals.
Unless it has been reversed by the United States Supreme Court, Administrative Law
Judges are required to apply Board precedent even when it conflicts with court of appeals
decisions, Waco, Inc., 273 NLRB 746, 749 fn. 14 (1984), Arrow Flint Electric Co., 321 NLRB 45
1208 (1996). Therefore, I am obliged to apply Murphy Oil to the instant case and find that
Respondent violated Section 8(a)(1) as alleged.
JD–35–16
5
REMEDY
Having found that the Respondent has engaged in certain unfair labor practices, I shall
order it to cease and desist therefrom and to take certain affirmative action designed to effectuate
the policies of the Act. Consistent with the Board’s usual practice in cases involving unlawful 5
litigation, I shall order the Respondent to reimburse the plaintiff for all reasonable expenses and
legal fees, with interest,1 incurred in opposing the Respondent’s unlawful motion to dismiss his
collective FLSA action and compel individual arbitration, I order Respondent to rescind or
revise the Agreement, notify employees and the District Court that it has done so, and inform the
District Court that it no longer opposes the plaintiff’s claims on the basis of the Agreement.10
On these findings of fact and conclusions of law and on the entire record, I issue the
following recommended2
ORDER15
The Respondent, KO Huts, Inc., its officers, agents, successors, and assigns, shall
1. Cease and desist from
20
(a) Maintaining and/or enforcing a mandatory arbitration agreement that requires
employees, as a condition of employment, to waive the right to maintain class or collective
actions in all forums, whether arbitral or judicial.
(b) In any like or related manner interfering with, restraining, or coercing employees 25
in the exercise of the rights guaranteed them by Section 7 of the Act.
2. Take the following affirmative action necessary to effectuate the policies of the Act.
(a) Rescind the Binding Arbitration Agreement in all its forms, or revise it in all its 30
forms to make clear to employees that the Agreement does not constitute a waiver of their right
to maintain employment-related joint, class or collective actions in all forums.
(b) Notify all applicants and current and former employees who were required to sign
the Agreement in any form that the Agreement has been rescinded or revised and, if revised, 35
provide them a copy of the revised agreement.
(c) Notify the United States District Court that it has rescinded or revised the
mandatory arbitration agreements upon which it based its motion to dismiss Michael Tiffany’s
FLSA collective action and to compel arbitration of his claims, and inform the court that it no 40
longer opposes the plaintiff’s FLSA action on the basis on those agreements.

1 Interest shall be computed in accordance with F. W. Woolworth Co., 90 NLRB 289 (1950), with
interest at the rate prescribed in New Horizons, 283 NLRB 1173 (1987), compounded daily as prescribed
in Kentucky River Medical Center, 356 NLRB No.8 (2010).
2 If no exceptions are filed as provided by Sec. 102.46 of the Board’s Rules and Regulations, the
findings, conclusions, and recommended Order shall, as provided in Sec. 102.48 of the Rules, be adopted
by the Board and all objections to them shall be deemed waived for all purposes.
JD–35–16
6
(d) In the manner set forth in the remedy section of this decision, reimburse the
plaintiff for any reasonable attorney’s fees and litigation expenses that he may have incurred in
opposing the Respondent’s motion to dismiss his wage claim and compel individual arbitration.
(e) Within 14 days after service by the Region, post at all its facilities in Kansas and 5
Oklahoma copies of the attached notice marked “Appendix.”3 Copies of the notice, on forms
provided by the Regional Director for Region 14, after being signed by the Respondent’s
authorized representative, shall be posted by the Respondent and maintained for 60 consecutive
days in conspicuous places including all places where notices to employees are customarily
posted. In addition to physical posting of paper notices, the notices shall be distributed 10
electronically, such as by email, posting on an intranet or an internet site, and/or other electronic
means, if the Respondent customarily communicates with its employees by such means.
Reasonable steps shall be taken by the Respondent to ensure that the notices are not altered,
defaced, or covered by any other material. In the event that, during the pendency of these
proceedings, the Respondent has gone out of business or closed the facility involved in these 15
proceedings, the Respondent shall duplicate and mail, at its own expense, a copy of the notice to
all current employees and former employees employed by the Respondent at any time since
March 25, 2015.
(f) Within 21 days after service by the Region, file with the Regional Director a 20
sworn certification of a responsible official on a form provided by the Region attesting to the
steps that the Respondent has taken to comply.
Dated, Washington, D.C., April 20, 2016.
25
Arthur J. Amchan
Administrative Law Judge

3 If this Order is enforced by a judgment of a United States court of appeals, the words in the notice
reading “Posted by Order of the National Labor Relations Board” shall read “Posted Pursuant to a
Judgment of the United States Court of Appeals Enforcing an Order of the National Labor Relations
Board.”
APPENDIX
NOTICE TO EMPLOYEES
Posted by Order of the
National Labor Relations Board
An Agency of the United States Government
The National Labor Relations Board has found that we violated Federal labor law and has
ordered us to post and obey this notice.
FEDERAL LAW GIVES YOU THE RIGHT TO
Form, join, or assist a union
Choose representatives to bargain with us on your behalf
Act together with other employees for your benefit and protection
Choose not to engage in any of these protected activities.
WE WILL NOT maintain and/or enforce a mandatory arbitration agreement that requires
employees, as a condition of employment, to waive the right to maintain class or collective
actions in all forums, whether arbitral or judicial.
WE WILL NOT in any like or related manner interfere with, restrain, or coerce employees in the
exercise of the rights guaranteed them by Section 7 of the Act.
WE WILL rescind the Binding Arbitration Agreement in all its forms, or revise it in all its forms
to make clear to employees that the Agreement does not constitute a waiver of their right to
maintain employment-related joint, class or collective actions in all forums.
WE WILL notify all applicants and current and former employees who were required to sign the
Agreement in any form that the Agreement has been rescinded or revised and, if revised, provide
them a copy of the revised agreement.
WE WILL notify the United States District Court that we have rescinded or revised the
mandatory arbitration agreements upon which we based our motion to dismiss Michael Tiffany’s
FLSA collective action and to compel arbitration of his claims, and inform the court that we no
longer opposes the plaintiff’s FLSA action on the basis on those agreements.
WE WILL reimburse Michael Tiffany for any reasonable attorney’s fees and litigation expenses
that he may have incurred in opposing our motion to dismiss his wage claim and compel
individual arbitration.
KO HUTS, INC.
(Employer)
Dated By
(Representative) (Title)
The National Labor Relations Board is an independent Federal agency created in 1935 to enforce the National Labor
Relations Act. It conducts secret-ballot elections to determine whether employees want union representation and it
investigates and remedies unfair labor practices by employers and unions. To find out more about your rights under
the Act and how to file a charge or election petition, you may speak confidentially to any agent with the Board’s
Regional Office set forth below. You may also obtain information from the Board’s website: www.nlrb.gov.
1222 Spruce Street, Room 8.302, Saint Louis, MO 63103-2829
(314) 539-7770, Hours: 8 a.m. to 4:30 p.m.
The Administrative Law Judge’s decision can be found at www.nlrb.gov/case/14-CA-160870
or by using the QR code below. Alternatively, you can obtain a copy of the decision from the Executive Secretary,
National Labor Relations Board, 1015 Half Street, S.E., Washington, D.C. 20570, or by calling (202) 273-1940.
THIS IS AN OFFICIAL NOTICE AND MUST NOT BE DEFACED BY ANYONE
THIS NOTICE MUST REMAIN POSTED FOR 60 CONSECUTIVE DAYS FROM THE DATE OF POSTING AND MUST NOT BE
ALTERED, DEFACED, OR COVERED BY ANY OTHER MATERIAL. ANY QUESTIONS CONCERNING THIS NOTICE OR
COMPLIANCE WITH ITS PROVISIONS MAY BE DIRECTED TO THE ABOVE REGIONAL OFFICE’S
COMPLIANCE OFFICER, (314) 539-7780.