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Ensure lawyer knows about arbitration clause

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in Employment Law,Human Resources

If you use an arbitration clause to cut down on expensive litigation, make sure your attorneys know as soon as an employee sues. Otherwise, you may end up waiving your right to compel arbitration.

Recent case: A group of beauty school students sued their school, claiming that they were really employees when they were forced to perform tasks unrelated to their training as hairdressers.

For example, they had to sweep floors, wash and fold towels, run the register at the shop where students practiced on customers and perform other miscellaneous tasks—all without pay.

They alleged that this violated the Fair Labor Standards Act.

The school disputed that the students were employees entitled to pay.

But it wasn’t until over a year of litigation that the school seemingly remembered that the students had all signed arbitration agreements. The school then asked the court to send the case to arbitration.

The 9th Circuit Court of Appeals said it was too late.

It wrote that a party that signs a binding arbitration agreement and has subsequently been sued in court has a choice: It can either seek to compel arbitration or agree to litigate in court. It can’t choose both. It would be unfair to delay the case and force costs on litigants that they otherwise would not incur. (Martin, et al., v. Milan Institute, et al., No. 15-55696, 9th Cir., 2016)

Final note: The students now must show that they performed uncompensated work that was unrelated to their status as students. The school will likely try to show that everything they were required to do was part of their educational program.

If you use unpaid labor or interns, check with your attorney to see if you should pay them minimum wage for their work.

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