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Arbitration Poses Serious Threat to Employee Rights

Although courts across the country don’t always agree on whether arbitration agreements with employees should be enforced as a general rule, sometimes the fate of a particular arbitration agreement lies in a technicality. In the case of a recent proposed class action wage and hour lawsuit against Century Fast Foods Inc., a Taco Bell franchisee, that technicality revolves around the ambiguity of the term “related companies.”

Jesus M., a former employee who worked at a Taco Bell restaurant owned by Century, filed a wage and hour lawsuit on behalf of himself and all other similarly-situated current and former employees of the franchisee for allegedly denying them overtime, legally-mandated rest breaks under California labor law, and other claims. Century tried to invoke the arbitration agreement Jesus signed when he filled out an application to work for Taco Bell, but so far two courts have denied the company’s petition.

According to Century, Jesus signed a contract that included an agreement to use arbitration to settle all disputes with Taco Bell, as well as its related companies. The problem, according to the courts, is defining the term “related companies.” First the Los Angeles Superior Court said in 2015 that Century failed to prove it qualified as a “related company” of Taco Bell. Century appealed the decision and the case went before a California appellate court, which upheld the lower court’s ruling.

According to the appellate court, Century failed to provide sufficient evidence that there was an agreement between itself and Taco Bell that Century was a related company of Taco Bell. In it’s published decision, the court also pointed out that it had not seen sufficient evidence that Jesus could reasonably be expected to understand that Century was a related company of Taco Bell, and therefore subject to the arbitration agreement he had signed with the fast food chain. Instead, the court suggested it would have been more convincing if the franchisee had provided a separate contract for employees to sign that included an arbitration agreement between Century and its employees.

Century argued the contract should be sufficient as it is because the trial court had previously enforced the same arbitration agreement between Century and another party in a previous lawsuit. But the appellate court remained adamant that the lower court had made the correct ruling and that nothing exists to compel judges to make the same ruling in separate cases, even if those cases involve similar issues.

Arbitration clauses pose a serious threat to employees all across the country, although not every judge recognizes the threat. Arbitration was designed as a way for businesses to resolve their disputes with other businesses in a private setting outside the court system. But over the past decade or so businesses have started including arbitration agreements in their employment contracts, forcing their workers to settle all disputes in private, where the results are never published and class actions are not an option. This means employees with small claims never get the chance to combine their claims with other employees and companies get away with cheating their employees out of millions because there is no court system to hold them accountable. And because the results are kept private, many employees never learn about a valid claim they may have against their employer.The Chicago overtime lawyers at the Chicago Overtime Law Center are investigating unpaid overtime claims against large retail chains such as Petsmart, Officemax, Staples, Smart & Final, Apple, Walgreen’s, CVS, Urban Outfitters, GAP, Gem Financial, Abercrombie & Fitch, Limited, Forever 21, Macy’s, Target, JC Penney’s, Lowes, Burlington Coat Factory, Marshalls, TJ Max, Victoria’s Secret, Nieman Marcus, Saks Fifth Avenue, Best Buy, Home Depot, Apple, Best Buy, Sears, K Mart, J.C Penney, Walmart, Costco, PetSmart, REI and other retail chains for misclassifying employees as managers, erasing or altering time sheets or time records, pressuring workers not to report or record overtime, failing to pay for time spent on security checks, and otherwise failing to pay workers for overtime and other wages. If you are the victim this practice call us at one of our offices near Elgin and Aurora  at (312) 869-4095 or contact us online.