Many New York employers want their employees to agree to binding arbitration in the event of an employment law dispute, such as a claim for unpaid wages or overtime. While arbitration can be less expensive and time-consuming than traditional litigation, employees often lose valuable legal rights in the process. Among other things, it can be difficult to appeal an arbitration award, the equivalent of a civil judgment, even if the arbitrator fails to properly explain his or her decision.
Federal Court Confirms Award, Orders Employer to Pay Legal Fees
That does not mean that employees are always on the losing end of arbitration. When the award goes against an employer, it faces the same uphill climb on appeal. A recent decision by a federal appeals court here in New York offers a helpful illustration.
This case involved a bond trader who sought arbitration against his former employer over a number of issues, including unpaid commissions. A three-arbitrator panel heard the case and, while ruling against the employee on most of his claims, issued an award for over $1.1 million in unpaid wages. The employer then sought judicial review of the arbitration award in federal court.
As noted above, courts typically cannot review arbitration awards. But there is an exception under federal law when the award was obtained through “fraudulent activity.” In this case, the employer accused the employee of committing perjury during his testimony before the arbitration panel. Specifically, the employer said the employee “misled” the panel about the status of a pending investigation of him by federal securities regulators.
The district court declined to apply the fraudulent activity exception and confirmed the award. The U.S. Second Circuit Court of Appeals upheld the district court's ruling in a July 21 opinion. As the appeals court explained, even if the employee committed perjury, that in and of itself would not justify setting aside the arbitration award. Under federal law, the alleged fraud must be “material” to the arbitrator's decision.
Here, the arbitration panel never issued a “reasoned decision” explaining the reasons for its ruling. Indeed, neither party requested such a decision. As a result, there was no way to connect the employee's alleged perjury to the arbitrators' decision to award him unpaid wages.
On top of that, the Second Circuit also said the employer was liable for the employee's legal fees. Under New York law, an employee who prevails in a claim for unpaid wages, whether in court or through arbitration, is entitled to “reasonable attorneys' fees.” The Second Circuit left it to the district court to calculate the exact amount of fees owed in this case.
Get Help With an Unpaid Wages or Overtime Claim Today
Everyone has the right to be paid for the work they perform. If you have an unpaid wages or overtime issue with your employer (or former employer), you need to be proactive. An experienced New York employment law attorney can review your situation and apprise you of your legal options. Call the Law Offices of Mahir S. Nisar to speak with a lawyer today.