There has been a significant increase in the number of wage and hour lawsuits in which employees have alleged they have not been paid overtime, minimum wages, and/or have not received pay notices or spread of hours pay under state law.
These laws typically allow for employees to receive double damages for unpaid wages and allow the employee to receive interest and reasonable attorneys’ fees incurred for the bringing of the lawsuit.
These laws also allow an employee to sue on a collective action or class action basis on behalf of themselves and others who are similarly situated.
An individual plaintiff may only be owed a few thousand dollars; however, when other employees are added by a collective or class action, especially after the payment of liquidated damages, interest and attorney’s fees, what was once a minor matter could lead to significant exposure to the employer.
On May 21, 2018, in Epic Systems Corp. v. Lewis, the Supreme Court held that employees can waive their rights to pursue their wage and hour claims in court and their right to pursue them on a class action or collective action basis by entering into agreements with their employers to arbitrate disputes.
As a result, many employers are considering whether it makes sense to enter into such arbitration agreements with their employees.
There are both pros and cons to the use of these agreements:
Initial fees for commencing an arbitration are not insignificant and are often more than filing fees required to start an action in Court. The fees for the arbitrator are also usually several thousands of dollars.
However, arbitrations are usually resolved much quicker than lawsuits. While it is not uncommon for a lawsuit to take several years to be resolved, arbitrations are often completed within a year.
Also, there is no jury which also significantly reduces the cost. On the other hand, employers should be aware that by having employees sign such arbitration agreements, there may be instances where the cost in defending multiple suits in arbitration may actually exceed defense costs incurred in a class and/or collective action.
While a party in a trial has the right to appeal a decision by a judge in a litigation, there are only limited instances in which a party may seek to vacate (i.e. ask a court to not enforce) an arbitration award.
Courts, in determining whether an arbitration agreement should be enforced, look at the language that is used in such agreement to ensure that the employee understands the rights they are waiving by signing the agreement.
Arbitration agreements that are vague or are only slipped into an employee handbook may not be enforceable and in such circumstances, the employee may be able to proceed in court despite the arbitration language. Thus, before issuing such agreements to your employees, you should consult with an attorney whether such agreement passes muster.
Recently, New York State passed a law that went into effect on July 11, 2018 which states that employers will not be able to enter into arbitration agreements with their employees in which employees would be required to arbitrate sexual harassment claims against their employers.
This prohibition only applies to sexual harassment claims and an employer can still enter into arbitration agreements with their employees relating to other discrimination and/or wage and hour claims.
In sum, we believe that employers who do not yet have such arbitration agreements with their employees should consider whether they wish to enter into such agreements.
However, employers should weigh the pluses and minuses of entering into such agreements before doing so. Employers considering such agreements are encouraged to contact
“USE OF ARBITRATION AGREEMENTS TO LIMIT EXPOSURE IN WAGE AND HOUR CASES” was written by the team at Franklin Gringer & Cohen, P.C.