California District Court Compels Arbitration of Class and Collective Wage and Hour Claims

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Dorothy Gale famously remarked upon finding herself in Oz “Toto, I’ve got a feeling we’re not in Kansas anymore.” Class action wage and hour plaintiffs on the west coast are now awakening to the fact that while they may still be in California, California isn’t California any more.

In May we noted the almost overnight change in results arising for employers resisting class certification of wage and hour claims in California. Certification, once a foregone conclusion in the Golden State, was now becoming the exception rather than the rule. A recent case reflects that it is becoming equally difficult even to remain in court when an arbitration agreement is present.

In  Morris v. Ernst & Young LLP, Case No. C-12-04964 RMW (N.D. Cal. July 9, 2013), the plaintiffs brought almost garden variety wage and hour claims under federal law, contending that they had been misclassified as exempt and should have been entitled to overtime pay. They sought to represent a class of lower level accounting workers nationwide. Although the cases was initially filed in New York, the employer successfully moved to transfer the action to the Northern District of California.

During their employment, the plaintiffs had been required electronically to consent to arbitration, and the employer moved to compel arbitration of their claims. To resist arbitration, the plaintiffs raised a series of arguments that might very well have proven successful only two years ago. In the wake of Supreme Court decisions such as AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), and American Express Co. v. Italian Colors Restaurant (“AMEX IV”), 2013 WL 3064410 (June 20, 2013), the outcome was very different. Indeed, the court systematically rejected each of the plaintiffs’ arguments. These included:

-The employer agreed that the fee shifting provisions contained in section 16(b) of the FLSA would apply in arbitration, and thus the court found that the arbitration agreement did not run afoul of those provisions.

-Relying on AMEX IV, the court found that the cost of pursuing FLSA claims was not prohibitive. It rejected the curious argument apparently raised by the plaintiff that since the attorney fees incurred in arbitration were generally lower than those in court, arbitration somehow limited the plaintiffs’ relief.

-The court rejected the argument that the employer had waived arbitration by seeking to have the action litigation transferred from New York to California or due to its conduct in similar cases.

-The court rejected the argument that arbitration inherently deprives employees of their right to pursue collective actions under the FLSA.

-The court refused to follow the National Labor Relations Board’s decision in D.R. Horton, 357 NLRB 184 (2012), due to the strong policy favoring arbitration.

Finding the claims arbitrable, the court compelled arbitration and dismissed the case. Kansas, no, but not California either.

The Bottom Line: Even California courts are now beginning to refer class or collective matters to arbitration when they are covered by the applicable agreement.