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Plaintiffs Attys Turn Employee Arbitration Pacts Into Weapons

Law360—Scott Flaherty

Plaintiffs' attorneys in wage-and-hour disputes are using new strategies, like filing a slew of individual arbitration proceedings, to make life difficult for employers in light of the U.S. Supreme Court decision in AT&T v. Concepcion and other cases that looked favorably on arbitration agreements containing class waivers.

The 2011 Concepcion decision found that the Federal Arbitration Act preempted a state law invalidating class action waivers. It was followed by the high court's 2013 ruling in American Express v. Italian Colors, which held that courts can't invalidate a class arbitration waiver just because it would cost plaintiffs more to arbitrate their claims than they could recover.

Although neither stemmed from an employment dispute, the rulings have had a demonstrable impact on wage-and-hour litigation and have prompted many employers to adopt employee arbitration pacts with class action waivers, attorneys say.

Justin Swartz, a partner with Outten & Golden LLP who represents employees in wage and hour cases, explains that an increased reliance on arbitration agreements has had a particularly strong effect on employees, in part because it has given employers another way of avoiding potential wage-and-hour class or collective actions.

Concepcion, the Amex ruling and others “have all emboldened employers to force employees to waive their rights to go to court,” he said. “Courts are pretty clear that almost all arbitration agreements are enforceable.”

But Swartz and other plaintiffs' attorneys say they have not been completely foreclosed from bringing cases on behalf of multiple employees.

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Beyond attempts to have an entire agreement thrown out — something that normally happens only when the agreement is poorly drafted, according to both plaintiff- and management-side attorneys — some plaintiffs firms have altered their approach to make the most out of a landscape in which courts typically uphold arbitration pacts, including those with class action waivers.

One strategy is to go ahead and pursue a wage-and-hour claim in individual arbitration.

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And some plaintiffs' firms have taken it a step further, filing a number of individual arbitration proceedings on behalf of employees who, in other circumstances, might have been part of a class. The idea behind that approach, according to Swartz, is not only to advocate for an employee's claims but to hold an employer's feet to the fire and make a case expensive to defend, since most arbitration arrangements call for the employer to cover the arbitrator's fees.

“We're not going to go away. We're going to continue to defend employees' rights,” said Swartz. “Employers can enforce arbitration if they want to; it's just at their own peril.”

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... Swartz ... all say they have found success arbitrating wage-and-hour claims, either on an individual basis or using a multiple-plaintiff approach. But each also concedes that they'd still rather the Supreme Court had not come down the way it did in cases like Concepcion and Amex, which in their view impinged the rights of employees.

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