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Changes in How Arbitration Agreements are Handled Affects Car Dealerships

Monday, May, 23, 2016

Car dealerships often use binding arbitration agreements to resolve disputes with employees. This provides a number of benefits, including cost savings and privacy. It also makes it possible to avoid lengthy trials and protect relationships when possible, allowing employer-employee partnerships to sometimes continue.


Recently, the National Labor Relations Board (NLRB) determined the arbitration agreement of a California dealership, Concord Honda, was not illegal. This determination was based on the fact it contained a class action waiver and anyone signing the agreement would not have the freedom to participate in a class action suit, should one arise. The NLRB told the dealership it needed to rescind or revise the agreement.


Many other dealers felt pressure to abandon their arbitration agreements. They did not want to receive the attention Concord Honda received, nor did they want the union or employees demanding more aggressive changes.


Many attorneys representing car dealerships advised their clients to avoid rash decisions and attempt to create an arbitration agreement that would meet the proper standards. Agreements are still valuable tools, and class action waivers can also be valuable, when used correctly. Furthermore, many class action waivers are still perfectly legal, based on a Supreme Court decision made in 2011 that stated companies can prohibit employees from pursuing class action by requiring them to arbitrate on an individual basis.

This might change with time, and there are efforts underway to dismantle as many arbitration agreements as possible across industries. As of yet, employers are allowed to require arbitration from employees and from customers.