Employers use arbitration agreements to keep employment-related litigation out of the courts. But what if you don’t have an arbitration agreement in place when former employees file a wage-and-hour class action lawsuit against your company? Can you suddenly spring an arbitration agreement on current employees and expect it to work?
Surprisingly, yes, according to the 8th Circuit Court of Appeals.
Recent case: Jacqueline and several other former servers at a pizza chain filed a class-action lawsuit alleging they were subjected to illegal tip pooling in violation of the Fair Labor Standards Act. Other former employees soon joined the suit.
Then, a month after litigation began, the chain had current employees agree to arbitration for any employment-related complaints. The agreement explained its scope, the required procedures for invoking arbitration, the effect the agreement would have on employees’ ability to pursue relief in court, the right of every employee to opt out of the agreement free of retaliation and how to opt out effectively.
Along with the arbitration agreement, each employee received an opt-out form and an explanatory memorandum from the restaurant’s general manager. The memorandum was a two-page document that described the agreement’s fundamental terms in plain English. It specifically explained that one effect of the agreement, should an employee not opt out, would be to prevent the employee from joining Jacqueline in her class-action suit.
Jacqueline and her fellow former employees tried to have the agreements invalidated.
The court said they could not—only current employees had the right to do so. The case now proceeds without current employees unless one of them decides to challenge the arbitration agreement. (Connors, et al., v. Gusano’s, et al., No. 14-1829, 8th Cir., 2015)
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