Arbitration agreements are agreements contained in contracts that require the parties involved to settle disputes in arbitration, rather than in court. Although arbitration was initially intended as a cheaper, faster way for businesses to settle disputes between themselves, companies have increasingly expanded their interpretation of the law and included arbitration agreements in their employment contracts as well as their user agreements and contracts with their consumers.
District and federal courts across the country have disagreed when it comes to whether or not companies should be allowed to use and enforce these types of agreements in their contracts with individuals. But, at the very least, most arbitration agreements require all disputes between the parties to be resolved in arbitration, regardless of who files the complaint.
A California state appeals court recently ruled that a house painting company could not enforce an arbitration agreement that required its workers to settle all disputes in arbitration while allowing the employer to take the workers to court.
CW Painting Inc. allegedly hires college students as interns and has them run painting crews and sell services for the company. Martha Carbajal, the lead plaintiff of the proposed class action, worked for CW Painting for a few months in 2012 before filing allegations against her employer for failing to pay at least the minimum wage, along with other wage and hour violations. CW Painting tried to have the case sent to arbitration, but the California court refused to uphold the arbitration agreement.
The fact that the arbitration agreement was so blatantly unfair to workers while benefiting CW Painting was just one reason the court refused to uphold the arbitration agreement. The court also found the agreement to be unenforceable because signing it was a condition of employment, and because it failed to identify which of the rules under the American Arbitration Association would apply to the contract.
What was more, under the arbitration agreement, Carbajal would not have been able to collect attorneys’ fees, which would be included as part of a statutory award if she were to be successful in filing claims for alleged wage-and-hour violations under California’s Labor Code.
CW Painting argued the Federal Arbitration Act (FAA) should be applied to this case in order to compel Carbajal’s case into arbitration. But the FAA only applies to cases in which instances of interstate commerce exist and the court said it found no evidence of that in the contract between CW Painting and Cabajal.
Even if the arbitration agreement had also required CW Painting to settle all its claims in arbitration, most arbitration agreements are still grossly unfair to employees. They prohibit class action and collective action lawsuits and force everyone to settle their disputes individually. Unlike the courts, arbitration companies are for-profit entities that rely on the business that large corporations bring in, which might influence the arbitrator’s decision in the corporation’s favor. There is also often no explanation for an arbitrator’s decision and no opportunity for appeal.
The proposed class action wage and hour lawsuit, which can now proceed in California state court, alleges CW Painting illegally required its interns to cover the up-front costs of running the painting projects. When these business-related expenses were deducted from the wages the college interns were paid, the total was allegedly less than California’s state minimum wage.
The Illinois class action attorneys at the Chicago Overtime Law Center have three decades of experience fighting to help employees who are victims of wage, overtime and tip theft by their employers. We have a team of Chicago unpaid overtime lawyers who concentrate on prosecuting state and nationwide class action lawsuits. Our attorneys work out of Chicago and Oak Brook offices and pursue claims for workers all over the Chicago area including Island Lake, Volo and Lake Moor. We protect unpaid workers who haven’t received overtime throughout the Chicago area including in DuPage, Kendall, Lake, McHenry, Kane and Cook Counties.
Our Joilet, Cicero and Berwyn overtime lawyers are intimately familiar with the issues that arise during wage claim litigation, and we know the laws that govern overtime cases well. Many employers mis-classify employees as being exempt from overtime laws and pay workers salaries instead of hourly wages in order to avoid paying them overtime. Some employers mistakenly classify employees as exempt and others intentionally do so in order to circumvent the law. In either case, workers do not receive the wages they should, and a lawsuit may be the only way to recover their earned wages.
The Chicago Overtime Law Center is based in Chicago, and represents clients throughout the country who have unpaid overtime and other employment right claims.