Private National Mortgage Acceptance Company LLC ("Pennymac")

National Labor Relations Board - Administrative Judge Opinions

Nov 29, 2016

20-CA-170020 (N.L.R.B. Nov. 29, 2016)

JD(NY)-45-16
San Francisco, CA
UNITED STATES OF AMERICA
BEFORE THE NATIONAL LABOR RELATIONS BOARD
DIVISION OF JUDGES
NEW YORK BRANCH OFFICE
PRIVATE NATIONAL MORTGAGE
ACCEPTANCE COMPANY LLC,
“PENNYMAC”
And Case 20–CA–170020
RICHARD SMIGELSKI, an individual
Min-Kuk Song, Esq., Counsel for the
General Counsel.
Richard S. Zuniga, Esq., Counsel for
the Respondent.
Chris Baker, Esq., Counsel for the
Charging Party.
DECISION
RAYMOND P. GREEN, Administrative Law Judge. This case was presented to me by way
of a stipulated record. The charge was filed on February 18, 2016 and served upon the
Respondent on February 19, 2016. The Complaint was issued on May 10, 2016 and was
thereafter amended on July 14 and August 15, 2016. In substance, the Complaint as amended
alleges (a) that the Respondent violated Section 8(a)(1) by implementing and maintaining a
company-wide arbitration policy applicable to most employment-related disputes and which
requires employees as a condition of employment to waive any right to join or consolidate
claims in arbitration with others or to make claims as a representative or member of a class or in
a private attorney general capacity, unless such procedures are agreed to by to both the
company and the employee; and (b) that the Respondent violated Section 8(a)(1) by seeking to
compel the Charging Party to submit his claims alleged in Smigelski v. PennyMac Financial
Services Inc. to arbitration.
FINDINGS AND CONCLUSIONS
I. JURISDICTION
The 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.
II. THE ALLEGED UNFAIR LABOR PRACTICE
The stipulated facts are as follows:
1. The Respondent originates and services residential mortgage loans in 49 states,
including California and the District of Columbia. Since 2008, the Respondent has maintained
and enforced a company-wide Mutual Arbitration Policy, (referred to as MAP), that requires
mandatory, binding arbitration of disputes for all employees as a mandatory condition of
JD(NY)-45-16
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employment. MAP covers all disputes relating to or arising out of an employee’s employment
and requires employees to forego and waive any right to join or consolidate a claim with others
or to make claims as a representative or as a member of a class. This essentially means that
the Respondent’s employees can pursue employment related claims only by way of arbitration
and only on an individual basis. The Respondent requires every employee to sign a document 5
called the Employee Agreement to Arbitrate, referred to herein as the EAA, pursuant to which
they acknowledge and agree to the terms of the MAP.
2. The Charging Party, Smigelski was employed by the Respondent as an Account
Executive from November 2014 to April 2015. He signed the EEA on November 17, 2014 and 10
therefore acknowledged and agreed to the MAP.
3. The MAP states that it was adopted as a mandatory condition of employment and
further states that an employee’s decision to accept employment or to continue employment
with PennyMac constitutes agreement to be bound by the MAP. The signed EEA also states 15
that the MAP is a condition of employment. In pertinent part the provisions of the MAP are as
follows:
The MAP applies to PennyMac employees, regardless of length of service or
status and covers all disputes relating to or arising out of an employee’s 20
employment with PennyMac or the termination of that employment. Examples
of the types of disputes or claims covered by the MAP include, but are not
limited to claims against employees for fraud, conversion, Misappropriation of
trade secrets, or claims by employees for wrongful termination of employment,
breach of contract, fraud, employment discrimination, harassment or retaliation25
under the American With Disabilities Act, the Age Discrimination in Employment
Act, Title VII of the Civil Rights Act of 1964 and its amendments, the California
Fair Employment and Housing Act or any other state or local anti-discrimination
laws, tort claims, wage or overtime claims or other claims under the Labor Code
or any other legal or equitable claims and cause or action recognized by local, 30
state or federal law or regulations. The MAP does not cover workers’
compensation claims, unemployment insurance claims or any claims that could
be made to the National Labor Relations Board. The MAP also does not
prohibit either PennyMac or any PennyMac employee from filing a claim in
small claims court, as long as the claim properly is within the jurisdiction of the 35
small claims court. Because the MAP changes the forum in which you may
pursue claims against PennyMac and affects your legal rights, you may wish to
review the MAP with an attorney or other advisor of your choice. PennyMac
encourages you to do so.
40
Your decision to accept employment or to continue employment with
PennyMac constitutes your agreement to be bound by the MAP Likewise,
PennyMac agrees to be bound by the MAP. This mutual obligation to arbitrate
claims means that both you and PennyMac are bound to use the MAP as the
only means of resolving any employment-related disputes. This mutual 45
agreement to arbitrate claims also means that both you and PennyMac forego
any right either may have to a jury trial on claims in any way to your
employment and both you and PennyMac forego and waive any right to join or
consolidate claims in arbitration with others or to make claims in arbitration as
a representative or as a member of a class or in a private attorney general 50
capacity, unless such as procedures are agreed to by both you and
JD(NY)-45-16
3
PennyMac. No remedies that otherwise would be available to you individual or
to PennyMac in a court of law, however, will be forfeited by virtue of this
agreement to use and be bound by the MAP.
4. The MAP describes in some detail the arbitration process and states that the 5
employee and the Respondent will share the cost of the American Arbitration Association’s filing
fee and the arbitrator’s fees and cost, except that the employee’s share shall not exceed the
amount equal to the local court’s civil filing fee. It also provides that except as otherwise
provided by law, the employee will be responsible for the fees and costs of legal counsel plus
other costs associated with witnesses and the obtaining of hearing transcripts. 10
5. The provisions of the MAP expressly exclude claims that might be made under the
National Labor Relations Board. However, it is also clear that in the MAP provisions there is no
description of what those types of claims might entail.
15
6. The parties stipulated that if called to testify, witnesses for the Respondent would
testify that the Respondent’s purpose in implementing the MAP was to create an expedient,
efficient, more cost-effective and fair means to resolve employment-related disputes that cannot
be resolved informally.
20
7. On November 17, 2014, Richard Smigelski signed the EEA wherein he acknowledged
receipt of the MAP.
8. On November 17, 2015, Smigelski filed a Complaint against the Respondent in the
Sacramento Superior Court, in case number 34-2015-00186855. This was entitled 25
“Representative Action Complaint for Violation of the Private Attorneys General Act of 2004”
(Labor Code Section 2698, et. seq.). In essence, this was an action on behalf of a class of non-
exempt employees for alleged violations of wage and overtime laws.
9. On February 16, 2016, the Respondent filed a Petition to Compel Arbitration and Stay 30
Action in the aforesaid law suit and sought to compel Smigelski to submit his claims to
arbitration in accordance with the MAP.
10. On March 10, 2016, Smigelski filed a First Amended Complaint in Smigelski v.
PennyMac. 35
11. On March 11, 2016, the Court issued an Order denying the Respondent’s Petition to
Compel Arbitration.
12. On March 25, 2016, the Respondent filed a Petition to Compel Arbitration and Stay 40
Action in relation to the amended Complaint filed in Smigelski v PennyMac.
13. On March 25, 2016, the Respondent filed a Motion for Reconsideration regarding the
Court’s denial of its previous Petition to Compel Arbitration.
45
14. On April 22, 2016, the Sacramento Superior Court issued an Order denying the
Respondent’s Petition to Compel Arbitration.
15. On April 22, 2016, the Sacramento Superior Court issued an order denying the
Respondent’s Motion for Reconsideration. 50
JD(NY)-45-16
4
III. DISCUSSION
This is another in a long line of cases involving whether (a) an employer can require its
employees to agree, as a condition of continued employment, to utilize arbitration as an
alternative to the judicial process for resolving employment disputes; and (b) whether an 5
employer can require employees, as a condition of continued employment, to waive their ability
to file class action claims. (Whether in a court or before an arbitrator).
It is the Board’s current position, despite reversals by several Circuit Courts, that an
employer will violate Section 8(a)(1) of the Act when it requires its employees to utilize 10
arbitration to resolve employment disputes and when it precludes employees from acting in
concert to bring class actions, whether in court or before an arbitrator.
In my capacity as an Administrative Law Judge of the NLRB, I am bound to follow Board
precedent irrespective of contrary opinions by Circuit Courts, unless and until the Supreme 15
Court makes a definitive ruling on the subject matter in dispute.
Therefore, this case is controlled by the Board’s decision in Murphy Oil USA, Inc., 361
NLRB No. 72 (2014), enf. denied 808 F.3d 1013 (5th Cir. 2015). In Murphy Oil and subsequent
cases, the Board has consistently held that requiring employees to sign class action waivers, 20
with or without an “opt out” clause, is a violation of Section 8(a)(1) of the Act.
Further, in light of the manner in which the MAP provisions are broadly drafted, I
conclude that employees would have a reasonable basis for concluding that they would be
precluded from filing charges with the National Labor Relations Board. In the absence of some 25
reasonable explanation to employees of their rights under the National Labor Relations Act, the
minimal statement to the effect that the MAP excludes charges filed with the Board is, in my
opinion, insufficient to assure employees that their rights to file charges with the National Labor
Relations Board have not been adversely affected. SolarCity Corp., 363 NLRB No. 83, slip op.
at page 6 (2015). 30
Finally, in light of current Board precedent, I must reject the Respondent’s contention
that its Motions to compel individual arbitration were protected by the First Amendment’s
Petition Clause. The Supreme Court in Bill Johnson’s Restaurants v. NLRB, 461 U.S. 731,731–
743 (1983), noted that there were two situations where such legal actions do not enjoy the 35
Amendment’s protection. The first is where the action is outside the State Court’s jurisdiction
because of Federal preemption. And the second is where the action seeks to enforce a matter
which is illegal under Federal law. The Board has therefore restrained litigation efforts that have
an illegal objective of curtailing employees’ Section 7 rights. Murphy Oil, supra, slip op. at 20–
21, Convergys Corp., 363 NLRB No. 51, slip op. at fn. 5 (2015). 40
CONCLUSIONS OF LAW
By maintaining a provision that requires employees to (a) waive the right to bring
class actions or to act concertedly in regard to their terms and conditions of employment; 45
(b) waive the right to initiate lawsuits regarding terms and conditions of their
employment; and (c) by filing Motions in Court to compel an employee to arbitrate on an
individual basis a class action lawsuit relating to terms and conditions of employment,
the Respondent has violated Section 8(a)(1) of the Act.
50
JD(NY)-45-16
5
REMEDY
As it concluded that the Respondent has unlawfully maintained an Arbitration Policy that
precludes class or collective actions by employees, I shall recommend that it be ordered to
rescind or revise that policy to make it clear to employees that the Policy and agreements made 5
pursuant to the Policy do not constitute a waiver in all forums of their rights to maintain class or
collective actions relating to their wages, hours or other terms and conditions of employment. I
shall also recommend that the Respondent be required to notify its employees of the rescinded
or revised Policy.
10
Because the Arbitration Policy has been and continues to be maintained throughout the
United States, it is recommended that the Respondent be ordered to post the attached Notice at
all locations where the Policy has been or is still in effect.
To the extent that the Charging Party has incurred litigation expenses relating to the 15
Respondent’s Petition to compel arbitration in conformance with its Arbitration Policy, it is
recommended that the Respondent reimburse the Charging Party for such expenses with
interest as determined in Kentucky River Medical Center, 356 NLRB 6 (2010), enf. denied on
other grounds, sub. nom. Jackson Hospital Corp. v. NLRB, 647 F.3d 1137 (DC Cir. 2011).
20
Additionally, although the Sacramento Superior Court has denied the Respondent’s
Petitions and Motions to compel arbitration, it is not clear to me that the matter has been finally
put to rest and that no appeal has been or will be filed. It therefore is recommended that the
Respondent be required to file Motions with the Court in Smigelski v. PennyMac, requesting the
withdrawal of its motions to compel individual arbitration. 25
On these findings of fact and conclusions of law and on the entire record, I issue the
following recommended1
ORDER30
The Respondent, Private National Mortgage Acceptance Company LLC, (“PennyMac”),
its officers, agents, and representatives, shall
1. Cease and desist from 35
(a) Maintaining and/or enforcing a policy that compels employees, as a condition of
employment waive the right to maintain class or collective actions in all forums, whether arbitral
or judicial.
40
(b) Requiring employees to sign binding arbitration agreements that prohibit collective
and class litigation.
(c) In any like or related manner, interfering with, restraining, or coercing employees in
the exercise of their rights under Section 7 of the Act. 45

1 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(NY)-45-16
6
2. Take the following affirmative action necessary to effectuate the policies of the Act.
(a) Rescind or revise the mandatory arbitration policy in all of its forms, or revise it in all
of its forms, to make clear to employees that the arbitration policy does not constitute a waiver
of their right to maintain employment-related joint, class, or collective actions in all forums or 5
that requires employees to waive their right to maintain employment-related class and collective
claims in all forums, whether arbitral or judicial.
(b) Notify all current and former employees who were required to sign or otherwise
become bound by the mandatory arbitration policy in any form that it has been rescinded or 10
revised and, if revised, provide them with a copy of the revised policy.
(c) Withdraw any pending motions for individual arbitration in which the Respondent
seeks enforcement of the arbitration policy’s unlawful restriction on class or collective claims; or
if such motions have already been granted, move the appropriate court to vacate any orders for 15
individual arbitration and reimburse employees for any litigation expenses including attorney’s
fees, directly related to opposing Respondent’s motions to compel individual arbitration.
(d) In the manner set forth in this decision, reimburse Richard Smigelski for any
reasonable attorneys’ fees and litigation expenses that he may have incurred in opposing the 20
Respondent’s Motion to compel individual arbitration.
(e) Within 14 days after service by the Region, post at its locations nationwide where
the Arbitration Policy has been promulgated, maintained or enforced copies of the attached
notice marked “Appendix.” Copies of the notice, on forms provided by the Regional Director for 25
Region 20 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 the physical posting of
paper notices, the notices shall be distributed electronically, such as by email, posting on an
intranet or internet site, and /or other electronic means, if the Respondent customarily 30
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 addition, a copy of this notice will be made available to employees on the same
basis and to the same group or class of employees as the Arbitration Policy was made available
to them. In the event that, during the pendency of these proceedings, the Respondent has gone 35
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 July 10, 2012.
(f) Within 21 days after service by the Region, file with the Regional Director a sworn 40
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. November 29, 2016
45
________________________
Raymond P. Green
Administrative Law Judge
50
JD(NY)-45-16
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 the National Labor Relations Act
and has ordered us to post and abide by this notice.
Section 7 of the Act gives employees these rights.
To organize
To form, join, or assist any union
To bargain collectively through representatives of their own choice
To act together for other mutual aid or protection
To choose not to engage in any of these protected concerted activities.
WE WILL NOT maintain or enforce the MAP policy or any agreements made with employees
pursuant to that policy that waives the right to maintain class or collective action in any forum.
WE WILL NOT pursuant to the terms of such agreements enforce them by filing Motions in
Court to stay collective action lawsuits and to compel individual arbitrations.
WE WILL NOT require employees to sign binding arbitration agreements that prohibit collective
and class litigation.
WE WILL NOT in any like or related manner, interfere with, restrain, or coerce employees in the
exercise of their rights under Section 7 of the Act.
WE WILL withdraw any pending motions in which we have sought to enforce the arbitration
policy’s unlawful restriction on class or collective claims; or if such motions have already been
granted, move the appropriate court to vacate any orders for individual arbitration.
WE WILL reimburse Richard Smigelski for any reasonable litigation expenses, including
attorney’s fees, directly related to opposing our motions to compel individual arbitration.
Private National Mortgage Acceptance Company
LLC, (“PennyMac”),
(Employer)
Dated By
(Representative) (Title)
JD(NY)-45-16
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.
901 Market Street, Suite 400, San Francisco, CA 94103–1735. Phone: (415) 356–5130.
Hours: 9 a.m. to 5:30 p.m.
The Administrative Law Judge’s decision can be found at www.nlrb.gov/case/20-CA-170020 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, (415) 356–5130).