The Danger of Arbitration Agreements in Overtime and Wage Hour Cases

The U.S. Supreme Court's recent decision in Epic Systems Corp. v. Lewis reaffirmed the ability of employers to compel employees to sign away their right to sue in favor of binding arbitration. More specifically, the Court said that agreements to arbitrate employment disputes individually rather than on a class or collective basis are enforceable under the Federal Arbitration Act. This includes overtime and wage hour claims under the Fair Labor Standards Act (FLSA).

For example, on July 2, just a few weeks after the Epic Systems decision, a federal judge in Brooklyn granted an employer's demand to compel arbitration in an FLSA case. The judge also rejected the plaintiffs' efforts to grant “conditional certification” of a class action against the employer.

The defendant in this case is a cosmetic surgery provider. The two named plaintiffs worked as “patient care consultants,” non-medical administrative staff who acted “as liaisons between patients” and the defendant's doctors. In their lawsuit, filed this past February, the plaintiffs alleged that they were “improperly characterized” as exempt employees under the FLSA. In other words, they should have received overtime pay but did not.

The defense immediately moved to stay the lawsuit and compel arbitration. The employer actually pointed to several agreements signed by the plaintiffs during the course of their employment. The first was a “hand-signed” contract that said arbitration would be the “exclusive means” of resolving any FLSA claims. The agreement further stipulated that it could “only be revoked or modified by a writing signed by the parties which specifically states an intent to revoke or modify this Agreement.”

Later, the plaintiffs each agreed to a second contract that contained a “Dispute Resolution Protocol,” which broadly required arbitration for “any dispute,” but did not specifically refer to the FLSA. However, this second agreement did contain an express waiver of any right to “arbitrate on a class or collective action basis.” This agreement was “signed” via an online portal where the employee had to click “I Accept.”

Finally, one of the plaintiffs signed a third agreement, again via an online portal, that expressly stated that any FLSA claims must be resolved through “single-party, bilateral arbitration.”

Based on all this, the judge held that the plaintiffs agreed to binding arbitration and granted the defense motion to stay. The judge specifically rejected the plaintiffs' claim that the various arbitration agreements were “unconscionable” as a matter of law. Under the Epic Systems decision, the plaintiffs must also “arbitrate their claims against defendants individually, not as part of a class, as that is what the two latter arbitration agreements require. Furthermore, regardless of which agreement applies, it must also cover "all of plaintiffs' potential claims, regardless of when the claims arose” during their actual employment.

Get Legal Advice Before Signing an Arbitration Agreement

As you can see, arbitration agreements are often quite sweeping in scope–and that is often to the detriment of the employee. That is why you should always exercise caution before signing such a contract. If you have any questions or concerns about your legal rights and need to speak with a qualified New York employment attorney, contact the Law Offices of Nisar Law Group, P.C., today.


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