[author: Matthew Burrows - Law Clerk]

On interlocutory appeal, the Second Circuit affirmed a district court decision denying arbitration because a later-signed compensation agreement did not retroactively apply as it contravened the intent of a prior independent contractor agreement.

Plaintiff-Appellees Timothy Pratt, William Burrell (“plaintiffs”) and others brought a putative class action suit against Cellular Sales of New York and its parent company (together “Cellular”) for a denial of compensation and other benefits as plaintiffs were considered independent contractors instead of employees. Cellular required plaintiffs to create a separate corporate entity and also sign an independent sales agreement before acting as a representative to sell Verizon Wireless services. Cellular later hired plaintiffs as full-time employees and where the parties executed a new compensation agreement, which contained an arbitration provision. At issue was whether plaintiffs were required to arbitrate claims that occurred prior to the new compensation agreement.

Plaintiffs argued that the compensation agreement should not be applied retroactively and only prospectively. Defendants argued that the compensation agreement did not contain an “express temporal limitation” and therefore could apply to claims prior to the memorialization of the compensation agreement. The court noted that the plaintiffs and Cellular had an evolving relationship, whereby Cellular only started to provide employee benefits to plaintiffs after the new compensation agreement was executed. Additionally, the court noted that Cellular “affirmatively stated that [plaintiffs] were not employees for over a year, it rings hollow for them to now argue that the parties intended the word “employment” in the Compensation Agreements to apply retroactively as to this dispute.” For these and other reasons, the court denied Cellular’s motion to compel arbitration. Holick v. Cellular Sales of New York, LLC, No. 14-4323 (2nd Cir. Sept. 22, 2015).