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Arbitration Used to Try to Bar Mis-classification Claims in Overtime Case

Misclassifying employees as exempt from overtime requirements is bad enough on its own, but the damage done can be compounded when the inaccurate status prevents employees from bringing their grievances against their employer to a court of law.

That’s what happens when employees are forced to sign arbitration agreements, which have become increasingly common throughout all American industries. Having started out as a way for businesses to resolve disputes between each other, companies have increasingly been expanding their interpretation of the Federal Arbitration Act to include relationships between businesses and individuals, such as their employees. Most employment contracts now contain arbitration clauses that require workers to use arbitration to settle all disputes with their employer.

There are several problems with this, with the biggest one probably being the fact that arbitration agreements prevent a lot of cases from ever getting a hearing. Because arbitration is not equipped to handle class actions or collective actions, individuals with small claims against their employer don’t have the opportunity to combine their claims in order to justify the costs of filing the complaint. Without this protection, many small claims go unresolved.

Unlike court documents, arbitration results are completely private. That means, in addition to banning class actions and collective actions, many workers never know if one of their colleagues successfully filed a complaint against their employer. While a lot of workers remain uneducated about the full extent of their rights under the applicable labor laws, many of them aren’t aware their rights are being violated until they hear about another employee filing a lawsuit. By hiding employment disputes in arbitration, companies are deceiving, not only their workers, but potential employees who won’t find anything about the employment disputes handled in arbitration, potentially leading them to a false conclusion about the company from which they’re seeking employment.

When, Kartik Patel, a restaurant manager for Jack in the Box Inc., sued them for allegedly misclassifying him as exempt from overtime when he allegedly did not meet the requirements, Jack in the Box moved to have the case dismissed. U.S. District Judge Marilyn L. Huff granted Jack in the Box’s motion, saying Patel’s status as a manager does not provide him with any protections under the National Labor Relations Act (NLRA).

But Patel argues he was a manager only in name and that he did not meet the requirements for overtime exempt status under the executive category of the federal Fair Labor standards Act (FLSA). According to his complaint, Patel spent most of his time at work performing the same menial tasks as non-managers who were classified as non-exempt workers. He alleges he rarely had a chance to exercise his own judgment at work and did not spend the majority of his time managing other employees.

Despite the fact the FLSA provides specific requirements for employees to be considered exempt, rather than relying on a title, and despite Patel’s allegations he did not meet those requirements, Judge Huff appears to have considered only Patel’s title when determining he was not protected by the NLRA.

The Chicago non-compete agreement 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 Hoffman Estates and Schaumburg We protect unpaid workers who haven’t received overtime throughout the Chicago area including in DuPage, Kendall, Lake, McHenry, Kane and Cook Counties.

Our Hinsdale and Elmhurst 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.