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Hobby Lobby’s Arbitration Agreements Denied by Court

Wednesday, September, 23, 2015

A judge from the National Labor Relations Board ruled that agreements signed by Hobby Lobby and its employees that require arbitration instead of court are unenforceable. The ruling could potentially undermine the common practice used by employers to avoid expensive litigation under federal labor laws. The charges regarding the agreements were brought against Hobby Lobby by the Committee to Preserve the Religious Right to Organize.


Legal experts agree the ruling is accurate and impactful because it could apply to a wide variety of employment disputes. An employer would have no power to compel arbitration in any employee-employer dispute. Currently, agreements to waive litigation rights in favor of arbitration are allowed under the Federal Arbitration Act, but the judge’s decision in the Hobby Lobby case mean those agreements would be unenforceable if they are part of an employment contract because they have nothing to do with interstate commerce, which is required for federal law to apply.


Hobby Lobby’s arbitration agreements specifically state they are not part of their employment contract, which was crafted in a way to help them avoid the scope of federal employment laws like the National Labor Relations Act. The judge determined the agreement was too broad, specifically the part that stated it applied to any dispute, demand, claim, controversy, or other issue and decided that Hobby Lobby is not entitled to “have it both ways.”


This is not the first time Hobby Lobby has been the subject of legal action. In 2014, the Supreme Court ruled the company could deny healthcare for employees if the plans covered practices that went against the company owner’s religious beliefs.