THERE are valid overtime or meal break claims that may be too small to require a lawsuit. The litigation may cost too much and the payoff for one employee may not be worth the problem. However, an employer’s wage violations should be stopped, especially if it affects other employees. Hence, employees who experience the same labor violations may assert their rights as a group by filing a class action in court.
Unfortunately, it is becoming increasingly common for employers to require newly hired employees to sign an arbitration agreement as a condition of employment. By signing such agreements, the employee gives up the right to be heard by a judge or a jury in court. Instead, the employee’s claims is heard by an arbitrator, who makes a decision. The parties are bound by the arbitrator’s decision and the losing party cannot appeal.
Arbitration is most commonly used in commercial disputes, where the disputing parties are all business entities and have equal bargaining powers. The use of mandatory arbitration in employment disputes may be problematic because the agreement is practically imposed on the employee who needs the job. Often, the arbitration company is pre-selected by the employer in the agreement. And this arbitration company may have a continuing business relationship with the defense attorneys who represent employers.
When employees sign arbitration agreements, part of what they signed may include a “class action waiver.” A class action waiver prevents an employee from banding together with fellow aggrieved employees to file a class action to assert their rights. This means that should the employee wish to assert a claim, the employee can do so only as an individual and only by arbitration. Many courts have upheld these class action waivers as valid. Thus, employees who could have benefitted from the class action mechanism in court were left with little recourse. But the tide may now be turning in their favor.
Recently, the federal appellate court for California decided that class action waivers may violate employee rights. Consider below:
Stephen Morris and Kelly McDaniel worked for the accounting firm Ernst & Young. As a condition of employment, Morris and McDaniel were required to sign agreements not to join with other employees in bringing legal claims against the company. This “concerted action waiver” required employees to (1) pursue legal claims against Ernst & Young exclusively through arbitration and (2) arbitrate only as individuals and in “separate proceedings.” The effect of the two provisions is that employees could not initiate concerted legal claims against the company in any forum – not in court, in arbitration proceedings, or elsewhere.
However, the employees brought a class and collective action against Ernst & Young in federal court alleging that the employer misclassified them and other employees and denied them overtime wages in violation of federal and California labor laws. The employer moved to compel arbitration pursuant to the agreements signed by Morris and McDaniel. The court ordered individual arbitration and dismissed the case. The employees appealed.
The employees argued that their class action waiver agreements with the company violated federal labor laws and cannot be enforced. Specifically, they claim that the “separate proceedings” clause is contrary to the National Labor Relations Act (NLRA). The National Labor Relations Board (NLRB) which enforces the NLRA has previously determined that concerted action waivers violate the NLRA.
The appellate court agreed with the employees, stating that employees have the right to pursue work-related legal claims together. Concerted activity—the right of employees to act together—is the essential, substantive right established by the NLRA. Ernst & Young interfered with that right by requiring its employees to resolve all of their legal claims in “separate proceedings.” Accordingly, the concerted action waiver violates the NLRA and cannot be enforced. Thus, the employees may have their day in court after all.
The law in this area is continually changing. Employees are advised to consult with experienced counsel on questions relating to their ability to pursue wage claims in a class action.
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The Law Offices of C. Joe Sayas, Jr. welcomes inquiries about this topic. All inquiries are confidential and at no-cost. You can contact the office at (818) 291-0088 or visit www.joesayaslaw.com.
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C. Joe Sayas, Jr., Esq. is an experienced trial attorney who has successfully obtained significant recoveries for thousands of employees and consumers. He is named Top Labor & Employment Attorney in California by the Daily Journal, consistently Aselected as Super Lawyer by the Los Angeles Magazine, and is a member of the Million Dollar-Advocates Forum.