The United States Supreme Court recently validated the enforceability of class action waivers in an employer's arbitration agreement with its employees. As a result, in those agreements which contain a class action waiver provision, all employee-employer disputes must be resolved in one-on-one arbitrations rather than through a collective or class action.
The judicial circuits had been divided on the authority of such waivers prior to the Supreme Court's ruling earlier this month. In New York, however, which is within the jurisdiction of the Second Circuit, such class action waivers were already enforceable. Indeed, we were able to use the enforceability of such class action waivers in severely undermining a class action brought in the Second Circuit by employees in the hospitality industry.
In reality, a class action for wage violations is often motivated in large part by the employees' attorneys and the fact that if they are successful in proving a violation of the wage laws, they are statutorily entitled to have the employer pay, in addition to any other damages, the plaintiffs' attorney fees. This award is allowed even if the violation is relatively minimal.
In one case I tried several years ago, the plaintiffs' demand was almost two million dollars for ten plaintiffs. After trial the jury awarded $15,000 which was doubled to $30,000 because the violations were found to be intentional. The problem was that the plaintiffs' attorney had incurred in excess of $200,000 in attorney fees which the employer was required to pay in addition to the fees the employer had to pay my firm. By reducing these matters to individual claims, the financial incentive for the attorney is significantly undercut because he/she will only be receiving fees to prosecute one individual claim at a time, not a large group of claims.
This a huge decision for employers but it does not provide any benefit to them if they have not taken the time to incorporate the proper language in their employment agreement.
So if anyone is either an employer or is aware of any employers who have multiple employees working for them, please let us know. We can be of substantial service to them.
Sincerely,
Mario Biaggi Jr.
212-233-8000