The U.S. Supreme Court’s recent holding in AT&T Mobility LLC v. Concepcion has been increasingly used by employers in defending against and, in seeking dismissal of, FLSA collective actions. This tenet received new emphasis in a recent decision by the US Supreme Court in which the Court vacated a California court decision holding that an employee could proceed before the California Department of Labor Standards Enforcement (DLSE) with wage claims against his employer, notwithstanding that he had executed an arbitration agreement. The case is entitled Sonic-Calabasas A. Inc. v. Moreno in the U.S. Supreme Court.
The Court sent the case back to California state courts for further processing in light of the April 2011 decision in Concepcion. The essence of that earlier holding was that “states cannot require a procedure that is inconsistent with the [Federal Arbitration Act], even if it is desirable for unrelated reasons.” Counsel for the plaintiffs stated that he could not understand how the Concepcion holding applied to the facts of the case. The case involved a claim by an employee against a car dealership for allegedly unpaid vacation days.
Although he had signed an arbitration agreement, the employee submitted an administrative wage claim with the DLSE, under the state Labor Code. The Company petitioned state courts for an order compelling arbitration. The Company argued that the worker had waived his right to proceed judicially and had to utilize arbitration for a resolution of his claim..
Although the Concepcion holding applied to a consumer transaction, where arbitration provisions are commonplace in consumer contracts, a number of federal courts have extended its reach to collective and class action overtime cases. In this case, the rationale was applied to a wage payment action where no wages are sought but rather only accrued vacation time.
I am still cautious, however, about urging clients to incorporate arbitration provisions and class action waivers in every employee handbook as I worry about the specter of a dozen (or hundred) individual employee arbitrations where the claims and defenses are the same, which is why the “class action” manner of proceeding was “invented.”