KO Huts, Inc.

National Labor Relations Board - Board Decisions

Jul 31, 2018

366 NLRB No. 150 (N.L.R.B. 2018)

366 NLRB No. 150
NOTICE: This opinion is subject to formal revision before publication in the
bound volumes of NLRB decisions. Readers are requested to notify the Ex-
ecutive Secretary, National Labor Relations Board, Washington, D.C.
20570, of any typographical or other formal errors so that corrections can
be included in the bound volumes.
KO Huts, Inc. and Michael Tiffany. Case 14–CA–
164874
July 31, 2018
DECISION AND ORDER
BY MEMBERS PEARCE, MCFERRAN, AND KAPLAN
On April 20, 2016, Administrative Law Judge Arthur
J. Amchan issued the attached decision. The Respondent
filed exceptions and a supporting brief, and the General
Counsel filed an answering brief.
The National Labor Relations Board has delegated its
authority in this proceeding to a three-member panel.
The judge found, applying the Board’s decision in D.
R. Horton, Inc., 357 NLRB 2277 (2012), enf. denied in
relevant part 737 F.3d 344 (5th Cir. 2013), and Murphy
Oil USA, Inc., 361 NLRB 774 (2014), enf. denied in rel-
evant part 808 F.3d 1013 (5th Cir. 2015), that the Re-
spondent violated Section 8(a)(1) of the National Labor
Relations Act by maintaining and enforcing an arbitra-
tion agreement that requires employees, as a condition of
employment, to waive their rights to pursue class or col-
lective actions involving employment-related claims in
all forums, whether arbitral or judicial.
Recently, the Supreme Court issued its decision in Ep-
ic Systems Corp. v. Lewis, 584 U.S. __, 138 S.Ct. 1612
(2018), a consolidated proceeding including review of
court decisions below in Lewis v. Epic Systems Corp.,
823 F.3d 1147 (7th Cir. 2016), Morris v. Ernst & Young,
LLP, 834 F.3d 975 (9th Cir. 2016), and Murphy Oil USA,
Inc. v. NLRB, 808 F.3d 1013 (5th Cir. 2015). Epic Sys-
tems concerned the issue, common to all three cases,
whether employer-employee agreements that contain
class- and collective-action waivers and stipulate that
employment disputes are to be resolved by individual-
ized arbitration violate the National Labor Relations Act.
Id. at __, 138 S.Ct. at 1619–1621, 1632. The Supreme
Court held that such employment agreements do not vio-
late this Act and that the agreements must be enforced as
written pursuant to the Federal Arbitration Act. Id. at __,
138 S.Ct. at 1619, 1632.
The Board has considered the decision and the record
in light of the exceptions and briefs. In light of the Su-
preme Court’s decision in Epic Systems, which overrules
the Board’s holding in Murphy Oil, we conclude that the
complaint must be dismissed.1

1 We therefore find no need to address other issues raised by the Re-
spondent’s exceptions.
ORDER
The complaint is dismissed.
Dated, Washington, D.C. July 31, 2018
______________________________________
Mark Gaston Pearce, Member
______________________________________
Lauren McFerran, Member
______________________________________
Marvin E. Kaplan, Member
(SEAL) NATIONAL LABOR RELATIONS BOARD
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), of 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 mat-
ter 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 Charg-
ing Party’s class action lawsuit by moving to stay that proceed-
ing and compel individual arbitration of his claims.
Essentially the issues herein are those considered by the
Board in D. R. Horton, Inc., 357 NLRB 2277 (2012), enf. de-
nied in relevant part 737 F.3d 344 (5th Cir. 2013), and reaf-
firmed by the Board in Murphy Oil USA, Inc., 361 NLRB 774
(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
FINDINGS OF FACT
I. JURISDICTION
Respondent is a Kansas corporation, which had an office in
Wichita, Kansas and operates a number of Pizza Hut restau-
rants in Kansas and Oklahoma. In the 12 months ending Janu-
ary 31, 2016, Respondent derived gross revenues in excess of
$500,000. It purchased and received goods valued in excess of
2 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
$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 Okla-
homa facilities. Respondent admits, and I find, that it is an
employer 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
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
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 affili-
ates, and/or their current or former employees or (b) that
KOHI and/or its affiliates may have against me. Without limi-
tation, such claims include any concerning wages, expense re-
imbursement, compensation, leave, employment (including,
but not limited to, any claims concerning harassment, discrim-
ination, or retaliation), conversion, breach of fiduciary duty,
and/or termination of employment. This Agreement to Arbi-
trate 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 filing, participating in, or pursuing action
with an administrative agency in accordance with applicable
law, including the filing of charges or claims with the Nation-
al Labor Relations Board or the Equal Employment Oppor-
tunity Commission, or the filing of a workers’ compensation
claim or unemployment claim with an applicable state agen-
cy. In any arbitration, the American Arbitration Association
(“AAA”) will administer the arbitration, and the then prevail-
ing employment dispute resolution rules of the American Ar-
bitration Association will govern, except that (a) KOHI will
pay the arbitrator’s fees; (b) KOHI will pay the arbitration fil-
ing fee; and (c) as discussed below, the arbitration shall occur
only as an individual action and not as a class, collective, rep-
resentative, private attorney general action or consolidated ac-
tion. The rules are available for review 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 arbi-
trated only in an individual capacity, and not on behalf of or
as a part of any purported class, collective, representative,
private attorney general action, or consolidated action (collec-
tively referred to in this Agreement to Arbitrate as a ‘‘Class
Action”). Furthermore, KOH1 and I agree that neither 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 in-
stituted 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 permitted by law to waive any and all rights to the ap-
plication of Class Action procedures or remedies with respect
to all claims subject to this Agreement to Arbitrate. It is ex-
pressly agreed between KOHI and me that any arbitrator ad-
judicating 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 proceed-
ings is an 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 re-
lating to arbitrability, the scope or enforceability of this
Agreement to Arbitrate, or the validity, enforceability, and in-
terpretation of its prohibitions of class and representative pro-
ceedings, shall be for a court of competent jurisdiction to de-
cide.
I acknowledge and agree that this Agreement to Arbitrate is
made in exchange for my employment or continued employ-
ment, as well as the mutual promises to resolve disputes
through arbitration contained in this Agreement. This Agree-
ment to Arbitrate is not and shall not be construed to create
any contract of employment, express or implied. This Agree-
ment 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 time, with
or without advance notice, and with or without cause.
I understand that, by entering into this Agreement to Arbi-
trate, 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
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.
All prospective employees at Respondent’s restaurants, in-
cluding 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 Agree-
ment to Arbitrate.
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.
On October 21, Michael Tiffany filed a collective civil ac-
tion under the Federal Fair Labor Standards Act and a class
action under the Oklahoma Minimum Wage Act against the
Respondent in the United States District Court for the Western
District of Oklahoma. He seeks to recover unpaid wages alleg-
edly owed to himself and all similarly situated delivery driver
employees by Respondent. The essence of Tiffany’s claim is
KO HUTS, INC. 3
that Respondent, by allegedly inadequately reimbursing him by
mileage when delivering pizzas, in effect was paying him wag-
es below the minimum wage.
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,
2016, the United States District Court granted KO Huts’ motion
to compel arbitration.
Analysis
The Board held in Murphy Oil USA, Inc., 361 NLRB 774
(2014), and D. R. Horton, 357 NLRB 2277 (2012), that an em-
ployer 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
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 collec-
tive FLSA action and to compel individual arbitration, Murphy
Oil, supra; Cowabunga, Inc., 363 NLRB No. 133 (2016). The
Charging Party, Michael Tiffany engaged in protected concert-
ed activity by filing a collective civil action under the FLSA
and the Oklahoma Minimum Wage Statute. This is so regard-
less of whether he consulted with other employees. The poten-
tial 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 (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 Sec-
ond and Eighth Circuit Court of 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 hold-
ing that the Board is not required to acquiesce in adverse deci-
sions of the Federal courts in subsequent proceedings not in-
volving the same parties. Only the Supreme Court is author-
ized to interpret the Act with binding effect throughout the
whole country. The Board is not obliged to accept the interpre-
tation 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 deci-
sions, Waco, Inc., 273 NLRB 746, 749 fn. 14 (1984), Arrow
Flint Electric Co., 321 NLRB 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.
REMEDY
Having found that the Respondent has engaged in certain un-
fair 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 litigation, I shall order the Re-
spondent to reimburse the plaintiff for all reasonable expenses
and legal fees, with interest,1 incurred in opposing the Re-
spondent’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 Dis-
trict 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.
On these findings of fact and conclusions of law and on the
entire record, I issue the following recommended2
ORDER
The Respondent, KO Huts, Inc., its officers, agents, succes-
sors, and assigns, shall
1. Cease and desist from
(a) Maintaining and/or enforcing a mandatory arbitration
agreement that requires employees, as a condition of employ-
ment, 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, restrain-
ing, or coercing employees in the exercise of the rights guaran-
teed them by Section 7 of the Act.
2. Take the following affirmative action necessary to effec-
tuate the policies of the Act.
(a) 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.
(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, pro-
vide them a copy of the revised agreement.
(c) Notify the United States District Court that it has re-
scinded 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 longer opposes the plaintiff’s FLSA
action on the basis on those agreements.
(d) In the manner set forth in the remedy section of this de-
cision, 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

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 6 (2010).
2 If no exceptions are filed as provided by Sec. 102.46 of the
Board’s Rules and Regulations, the findings, conclusions, and recom-
mended Order shall, as provided in Sec. 102.48 of the Rules, be adopt-
ed by the Board and all objections to them shall be deemed waived for
all purposes.
4 DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD
facilities in Kansas and 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 con-
spicuous places including all places where notices to employees
are customarily posted. In addition to physical posting of paper
notices, the notices shall be distributed 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 al-
tered, 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
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 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.
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 no-
tice.
FEDERAL LAW GIVES YOU THE RIGHT TO
Form, join, or assist a union
Choose representatives to bargain with us on your be-
half
Act together with other employees for your benefit and
protection

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 Na-
tional Labor Relations Board” shall read “Posted Pursuant to a Judg-
ment of the United States Court of Appeals Enforcing an Order of the
National Labor Relations Board.”
Choose not to engage in any of these protected activi-
ties.
WE WILL NOT maintain and/or enforce a mandatory arbitra-
tion agreement that requires employees, as a condition of em-
ployment, 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, re-
strain, or coerce employees in the exercise of the rights guaran-
teed 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 em-
ployees who were required to sign the Agreement in any form
that the Agreement has been rescinded or revised and, if re-
vised, 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 at-
torney’s fees and litigation expenses that he may have incurred
in opposing our motion to dismiss his wage claim and compel
individual arbitration.
KOHUTS, INC.
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.