Arbitration may not bar class action

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in Leaders & Managers,People Management

Two managers at Dynamics Research brought a wage-and-hour class-action suit under the Fair Labor Standards Act (FLSA) and Massachusetts law. The company asked the court to throw out the class action because it said it had a “Dispute Resolution Program” that required arbitration and disallowed class-action suits.

The managers said the way the company instituted the dispute resolution process made it invalid. The company sent out a mass e-mail asking everyone to review new policy announcements that were attached. The e-mail itself didn’t describe the agreement in detail or mention the class-action waivers (indeed, that language was buried in an appendix to the attachments). The e-mail didn’t require employees to respond, but stated that employees who returned to work the following Monday were assumed to have accepted the terms of the agreement.

The court sided with the managers, concluding that the employer had handled the class-action waiver unfairly. Therefore it was not binding, and the class action could proceed. (Skirchak, et al., v. Dynamics Research Corporation, No. 06-2136, 1st Cir., 2007)

Advice: Don’t try to trick employees, especially on matters—such as class-action status and FLSA regulations—where the stakes are high. It’s natural to look for ways to minimize risk, and the threat of a class action certainly does increase an employer’s risk. So it’s OK (and even advisable) to ask employees to agree to resolve employment disputes via arbitration, instead of in court. But do it right. Arbitration agreements should be drafted by attorneys with specific experience in the states in which your business operates. 

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