Miller Health Law Group’s Experts on how to Protect Yourself from Wage and Hour Claims

On April 27, 2011, the United States Supreme Court issued an important decision that should cause every employer who does not already bind its employees to mandatory arbitration of employment disputes to consider doing so. Those employers who already require arbitration need to revise their arbitration agreements in light of the new decision.

In AT&T Mobility LLC v. Concepcion, the Supreme Court held that an arbitration agreement can provide that each party must sue individually and may not do so as a member of a class action. This decision overturns longstanding California precedent that class action waivers in arbitration agreements are unconscionable and thus not enforceable. While the AT&T decision involved an arbitration agreement contained in cellular phone contracts between AT&T and consumers, most legal observers believe the decision is equally applicable to arbitration agreements between employers and employees.

California employers have long feared being the target of a wage and hour class action (such as for overtime and meal time breaks). The legal costs of defending such actions are high as are the potential damages where a payroll practice is challenged on behalf of all current and former employees during the class period, which generally extends back four years prior to the filing of the action. With the AT&T decision, it appears that employers now have a mechanism to protect themselves from class actions. While employees will still be able to make wage and hour claims against their employers, if they are bound to an arbitration agreement with a class action waiver provision, employees will only be able to assert their own, individual claims and not on behalf of past and present co-workers.

In deciding whether to require your workforce to sign arbitration agreements, employers should be cognizant of the potential downsides of arbitration. While arbitration is touted as a quick, efficient and inexpensive way of resolving employee disputes, in practice, arbitration can often prove to be neither quick nor inexpensive. California law requires that employers who impose arbitration on their employees pay the entire costs unique to the arbitration system, including the arbitration tribunal’s often significant administrative fees and the arbitrator’s hourly rate. Moreover, in our experience, arbitration proceedings can sometimes take longer than in the court system where most judges try to bring matters to trial within one year from the filing date. Further, except in limited circumstances, the decision of an arbitrator is final and cannot be appealed. This is a significant benefit of arbitration- but only if you are the prevailing party.

Please feel free to contact your regular Miller Health Law Group attorney if you would like any more information on the AT&T decision and employee arbitration agreements.