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Can Arbitration Proceed as a Class Action?

One of the key reasons class action advocates are against arbitration agreements centers around the fact that arbitration is not equipped to handle class actions and collective actions, which immediately prohibits many plaintiffs from being able to file class claims.

Although arbitration is significantly less expensive than litigation (which is why so many corporations prefer to use it), it is still frequently more costly than claims most individuals can file for. Although a few hundred dollars may very well be a significant amount to that individual, it is rarely enough to justify the costs of arbitration, much less litigation.

Class actions and collective actions are therefore an important tool for plaintiffs with claims against large corporations. By cheating employees or consumers out of small amounts of money, companies can reap huge profits through unfair business practices. It also allows the companies to escape justice because their illegal practices never come to the attention of the courts, which means they can continue taking advantage of people.

Although arbitration was initially intended as a cost-effective way for businesses to handle disputes among themselves, more and more companies lately have been including arbitration agreements in everything from their employment contracts to their service contracts in order to escape the law.

But a recent Fifth Circuit Court decision might change all that.

Neffertiti Robinson used to work for J&K Administrative Management Services Inc., a management company based in Texas. Like an increasing number of employment contracts in the United States, Robinson’s contract required her to settle all disputes with her former employer in arbitration. J&K allegedly ignored Robinson’s first attempt to arbitrate her claims of unpaid wages. Robinson responded by sending a complaint letter on behalf of herself, as well as other similarly situated workers of the management company, which J&K also allegedly ignored. Another four former employees of J&K filed notices of consent to join the collective arbitration.

Robinson then sued her employer for breach of contract and petitioned the district court to compel J&K into arbitration. The court ruled that the terms of the arbitration agreement were so broad as to allow the arbitrator to decide whether the issues could be dealt with via collective arbitration.

J&K appealed the ruling and the case went to the Fifth Circuit Court, arguing that a previous ruling by the high court had determined that a party could not be compelled into class arbitration if the agreement between the parties did not specify terms for settling issues via class arbitration.

The circuit court determined that the specific ruling to which the management company was referring did not apply to the claims Robinson was bringing against her former employer. On the contrary, the appellate court stated that its prior decision did not overrule its own ability to determine when an issue was fit for arbitration. The court maintained this includes determining whether class mechanisms should be made available to the parties involved.

Although this ruling is a win for J&K’s former employees, it will still be up to the arbitrator to decide whether the plaintiffs can pursue their claims as a class.

The Chicago 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 Elkgrove Village and St. Charles. We protect unpaid workers who haven’t received overtime throughout the Chicago area including in DuPage, Kendall, Lake, McHenry, Kane and Cook Counties.

Our Cicero and Lombard 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.