N.Y. Appeals Court Nixes Employer’s Class-Action Waiver

(CN) – A class of insurance agents cannot be forced to arbitrate their overtime claims, a divided New York appeals court ruled Tuesday, because the class-action waiver in their employment contracts violates the National Labor Relations Act.

The New York Supreme Court Appellate Division’s decision concurs with the Seventh and Ninth Circuit’s rulings, but conflicts with a Fifth Circuit ruling on the same issue.

All three of those cases are now before the U.S. Supreme Court, which agreed in January to provide guidance on the circuit split.

In the New York case, former insurance agents for New York Life Insurance Company brought a class action seeking recovery for allegedly illegal wage deductions and violations of overtime laws.

However, the agents’ contracts contained a clause waiving any right to a jury trial or right to bring a class action.

“We find the Seventh Circuit’s reasoning in [Epic Systems Corp. v.] Lewis more persuasive — far more than that of the Fifth Circuit,” Justice Karla Moskowitz said, writing for the appeals court’s 3-2 majority.

The National Labor Relations Board has consistently maintained that such arbitration clauses conflict with labor laws giving workers the right to organize to complain about workplace conditions.

“We disagree with the Fifth Circuit’s reasoning for two reasons,” Moskowitz said. “First, the court’s reasoning begs the question, essentially asserting the circular argument that individual arbitration, not collective litigation, should be the norm because any other policy would impede arbitration. The court determined there to be no Congressional command that the NLRA should override the [Federal Arbitration Act, or FAA], but we can divine no reason that the FAA policy favoring arbitration should trump the NLRA policy prohibiting employers from preventing collective action by employees.”

Justice Richard Andrias dissented, joined by Justice David Friedman.

“Prohibiting class arbitration waivers would discourage arbitration in general, to an extent that is impermissible under the FAA,” Andrias wrote.

The U.S. Supreme Court’s decision in the matter will require it to consider the interplay between the FAA and NLRA, and whether to expand its 5-4 ruling in AT&T Mobility v. Concepcion, which held that the FAA preempts state laws that prohibit contracts from disallowing class-wide arbitration.

If the court’s conservative majority unites to expand Concepcion, an opinion authored by the late Justice Antonin Scalia, it will deliver a major blow to the NLRA’s guarantee of a right for employees to pursue “concerted activities.”

The nation’s high court has not yet scheduled oral arguments in the case.

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