Arbitrating Employment Wage Cases

Many employers include an arbitration clause in their employment contracts. An employee who signs this contract, gives up his or her right to sue in court over any job-related issues that may arise such as claims for wrongful termination, minimum wage payment violations, and overtime pay violations. Today’s employment law blog discusses recent developments about the applicability of arbitration clauses to claims of unpaid wages and overtime in New York.

Employers like to include arbitration clauses because the arbitration process is generally a quicker and cheaper alternative to a proceeding in court. Yet, a worker recently disagreed with a court’s decision requiring that he use arbitration instead of filing his Fair Labor Standards Act (“FLSA”) claim in court.

On December 12, 2017, the Second Circuit Court of Appeals was asked to decide whether claims under unpaid wage and overtime claims underthe FLSA are in fact subject to arbitration.

The FLSA and the New York Labor Law (“NYLL”) requires that most employees earn, at least, the minimum wage and receive overtime pay for all hours worked over 40 in a workweek. Overtime pay is one and one half times the regular rate of pay.

In Rodriguez-Depena v. Parts Authority, Inc., Rodriguez filed a lawsuit against his employer alleging that he was denied overtime pay in violation of the FLSA. His employment contract contained a provision requiring arbitration of any job-related dispute .Notably, Rodriguez’s employment contract was an individual one and not a collective bargaining agreement (“CBA”), meaning a contract negotiated by a union.

The district court compelled arbitration of the FLSA claim and Rodriguez appealed to the Second Circuit Court of Appeals, New York’s highest Federal appellate court, after disagreeing with the district court’s order.

On appeal, Rodriguez made several arguments. Among those arguments, Rodriguez argued that the United States Supreme Court had determined, in a previous case, that an employee could sue in a district court for an alleged FLSA violation. The employee in that case, however, was asserting rights based on a CBA. Therefore, the Supreme Court made it clear that collective rights under a CBA are different from individual contract rights under the FLSA.

Rodriguez also made an argument based on a recent Second Circuit decision – Cheeks v. Freeport Pancake House, Inc., which required court approval of FLSA claim settlements. He argued that if he settled his claim, the Cheeks case required the settlement to be approved by the court. Therefore, Rodriguez argued, this requirement prohibited arbitration of FLSA claims.

The Second Circuit was not impressed by any of his arguments. Specifically regarding the Cheeks case argument, the Second Circuit stated that the court approval requirement was to ensure the fairness of FLSA settlements and not to “guarantee” a “judicial forum.”

In sum, employees should be aware of the terms of their employment contract before signing one. If an employee is not careful, he or she could be agreeing to provisions which give up important legal rights. Importantly, employees who currently have arbitration provisions in their employment contracts, will likely be forced to arbitrate instead of litigate their FLSA claims.

The Long Island employment law firm Famighetti & Weinick, PLLC is available to review employment contracts and we are experienced in negotiating the terms of employment contracts. Also, if you have questions about arbitration of FLSA claims or the minimum wage and overtime pay requirements under the FLSA or the NYLL, contact a Long Island employment lawyer at Famighetti & Weinick at 631-352-0050. Our website is https://www.linycemploymentlaw.com.

Today’s Long Island employment law blog was written by Hofstra Law school intern, Thalia Olaya.