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Opt-Out Arbitration Program Binds Employees in Wage and Hour Class Action

A recent decision by a Wisconsin district court illustrates the impact of an arbitration agreement on class actions. The plaintiffs alleged violations of the Fair Labor Standards Act (FLSA) and state wage and overtime laws, claiming that employees were not compensated for 15 minutes of activity at the start of every workday and that actual pay was understated for purposes of calculating overtime. The defendants moved to compel arbitration on an individual basis.

The parties’ arbitration agreements provided that any covered employment disputes — including wage and hour claims — must be resolved through arbitration. The defendants established an arbitration program for resolving covered employment-related disputes, announced it to employees via email, and stated that, by participating in the program, employees, as well as the employers, were waiving their right to court litigation. Unless they actively opted out, employees were automatically enrolled in the program.

The plaintiffs argued that the arbitration agreements were both procedurally and substantively unconscionable because: (1) they did not voluntarily or knowingly waive their rights; (2) the remedies available were inadequate; (3) conflicting terms in the agreements created ambiguity; and (4) the agreements were improperly one-sided in favor of the defendants.

The court rejected all of these arguments. First, while the plaintiffs did not remember receiving notice, the record established that they did. Second, the plaintiffs appeared to be contesting arbitration as a reasonable resolution, an argument other courts had rejected, most recently the Supreme Court in Lamps Plus. Third, there were no conflicting terms in the agreement that created ambiguity. Finally, the agreement bound both employees and the employer to arbitration; therefore, the agreements were not one-sided.

Because the plaintiffs failed to meet their burden, the court granted the defendants’ motion to compel arbitration. By granting the motion, the plaintiffs could not pursue their claims in court as a class action, but were required to pursue their claims individually in arbitration.

Moorman v. Charter Commc’ns, Inc., No. 3:18-cv-00820, 2019 WL 1930116 (W.D. Wis. May 1, 2019)

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About this Author

Brooke Patterson  Associate Carlton Fields Litigation Insurance Financial Services

Brooke Patterson is a litigation associate whose practice focuses on class actions and complex civil litigation matters throughout the United States involving the insurance and financial services industries.While in law school, Brooke served as a judicial intern for the Honorable Edwin G. Torres, where she researched and prepared judicial opinions on various discovery and litigation issues. She was an editorial member of the University of Miami Law Review, and was on the executive board for the Charles C. Papy, Jr. Moot Court Board.