INDIVIDUAL ARBITRATION AGREEMENTS MAY CUT THE CLASS BY NEARLY A THIRD

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INDIVIDUAL ARBITRATION AGREEMENTS MAY CUT THE CLASS BY NEARLY A THIRD

By: Claudia D. Orr

I just want to provide a quick update to an article I wrote at the end of August concerning the Sixth Circuit’s decision that upheld individual arbitration agreements requiring employees to bring claims individually, and not part of a class or collective action. You will recall that in Gaffers v Kelly Services, Inc the employee had unsuccessfully challenged his arbitration agreement claiming it interfered with his rights under the Fair Labor Standards Act to join a collective action and his Section 7 rights to engage in concerted activity under the National Labor Relations Act. The latter challenge had been held invalid by the US Supreme Court earlier in the year in Epic Systems Corp v Lewis.

Well, now there is a case showing the real practical effect of individual arbitration agreements.  It comes out of California so the underlying claims (which include mandatory break and meal periods) wouldn’t occur in Michigan (unless the employee was a minor), but the impact of the individual arbitration agreements is clear and applicable here.

The case is Vigueras v Red Robin International, Inc, which was brought in the US District Court for the Central District of California. Manuel Vigueras filed a motion seeking class certification for servers, bartenders, cocktail servers, bussers, host/hostesses, cooks, expediters and dishwashers working in 71 Red Robin restaurants in California. The proposed class constituted more than 18,000 employees. The potential damages for this many employees are staggering.

However, beginning in September 2016, Red Robin began to require its employees to sign pre-dispute arbitration agreements that waived the right to bring certain claims in a class action. Red Robin indicated in one part of its brief that nearly 5000 employees had signed such agreements.

In the end, the court certified the proposed class, but held it has the authority to exclude all employees who had signed the arbitration agreements, except those who had signed them during the pendency of the class litigation and were not told about the litigation.  Thus, the court ordered discovery on this issue and it will be reargued. In the meantime, as to those employees, the court certified a subclass, the “Arbitration Subclass”. Those employees who either signed the agreements before the class action was filed or signed them after the filing but knew about the action will not remain in the class action  Those excluded employees will have to pursue their claims, if at all, on an individual basis in arbitration.

Can you imagine if Red Robin had required individual arbitration agreements years earlier such that everyone in the putative class was bound to bring their claims on an individual basis?  Individual wage claims seldom have sufficient damages to interest plaintiffs’ attorneys who generally work on a contingency fee basis.  But, here, there will still be well over 10,000 employees in the class making this a very lucrative case for counsel and a very expensive one for Red Robin.

I recently conducted a webinar called “What’s new and what to do about it” that covered a variety of topics, including arbitration agreements.  Whether such agreements are right for your company will require an analysis of whether your industry is a likely target of a class action (restaurants and home health care companies are, for example), the jurisdiction and venue of claims that may be brought, issues concerning potential appeals, and the costs of arbitration itself.

Arbitration agreements are not right for all companies and, even if yours would benefit from such agreements, a decision has to be made concerning which employees will be provided the agreements and which claims will be subject to it.  An experienced employment attorney, such as the author, can assist you in making these decisions.

This article was written by Claudia D. Orr, who is Secretary of the Board of Detroit SHRM, a member of the Legal Affairs Committee, and an experienced labor/employment attorney at the Detroit office of Plunkett Cooney (a full service law firm and resource partner of Detroit SHRM) and an arbitrator with the American Arbitration Association.  She can be reached at corr@plunkettcooney.com or at (313) 983-4863. For further information go to: http://www.plunkettcooney.com/people-105.html.  

 Detroit SHRM encourages members to share these articles with others, inside and outside their organization, as long as its name and logo, and the author’s information, is included in the re-post of the article. October 2018.