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9th Circuit to Rule on Whether Arbitration Agreements Can Bar Overtime Class Actions

The National Labor Relations Act (NLRA) grants all employees working in the U.S. the right to file any claims against their employer as a class action or collective action lawsuit. These types of lawsuits allow many employees with similar complaints against their employer to combine their claims into one large lawsuit. In doing so many employee complaints can come to the attention of the courts and the public that would not otherwise have that chance. Many employees aren’t aware of all their rights under the law, and even if they are aware, their complaints tend to be too small to justify the expense of filing an individual lawsuit.

On the other side of the spectrum is arbitration, which was initially designed for businesses to settle legal disputes among themselves outside of court. Arbitration is handled by an arbitrator who is supposed to be fair and unbiased, but the reality is not always so ideal. Arbitrators are in business to make money and can potentially be biased towards the party that brings them a lot of business, even if they’re unaware of that bias. Arbitration is private (neither the claims nor the results are made public), offers no explanation for the ruling, no opportunity to appeal the decision, and no class actions or collective actions.

Companies have increasingly been including arbitration agreements in their employment contracts to prevent their employees from filing class action lawsuits. Employee advocacy groups have argued these agreements unfairly burden employees by preventing most employees from being able to file any claims against their employer.

Business advocates, on the other hand, have argued class actions are unfair to businesses and that arbitration does nothing to repress employees’ rights. Courts have differed in their rulings, but the Seventh Circuit Court of Appeals recently ruled that an arbitration agreement included in Epic Systems’s employment contracts was overly restrictive to employees and, as a result, illegal. The National Labor Relations Board (NLRB), a government agency in charge of investigating and remedying unfair labor practices, cited the recent Seventh Circuit Court’s decision in its argument against similar employment contracts used by Countrywide Financial Corp., which is now owned by Bank of America.

In 2009, a former employee of Countrywide Home Loans (a division of Countrywide Financial) filed a class action lawsuit against the company for allegedly failing to pay minimum wage and overtime. In 2011, Countrywide filed a motion to have the case dismissed, citing its employment agreement, which requires all disputes between the company and its workers to be settled via individual arbitration.

In early 2013, the NLRB investigated Countrywide’s employment practices and found that the mandatory arbitration agreement violated the NLRA. The NLRB ordered Countrywide to revise its employment contract so that it would no longer include the individual arbitration agreement, to tell the California district court it would no longer be enforcing the agreement, and to compensate the two former employees who filed the class action lawsuit for the legal fees they incurred.

Countrywide appealed the ruling to the Ninth Circuit Court of Appeals and shortly afterwards the NLRB filed its own petition with the Ninth Circuit to enforce its ruling against Countrywide. The financial company is arguing that its arbitration agreement did not specifically prohibit employees from exercising their rights under the NLRA and that their employees would not reasonably interpret the agreement as such. The NLRB, on the other hand, argues Countrywide cannot enforce its arbitration agreement without restricting its employees’ access to class action and collective action lawsuits. The NLRB cited the Seventh Circuit Court’s recent decision against Epic Systems, as well as various other decisions in similar cases by the Ninth, Fifth and D.C. Circuit Courts.

The Ninth Circuit’s ruling in the Countrywide case could have similarly far-reaching consequences and may be cited in future arguments, either by the NLRB or other businesses, depending on which party the court sides with.

The Chicago class action and employment law 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 Schaumburg and Orland Park. We protect unpaid workers who haven’t received overtime throughout the Chicago area including in DuPage, Kendall, Lake, McHenry, Kane and Cook Counties.

Our Waukegan and Wheaton overtime and employment 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 Oak Brook, and represents clients throughout the country who have unpaid overtime and other employment right claims.