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Court denies employer’s effort to force class arbitration

A federal court in North Dakota has refused to require plaintiffs to file a single, class-wide arbitration case, instead allowing the arbitration cases to be filed individually.  The dispute originated when a plaintiff filed a case under the FLSA against DMS Operating, LLC, alleging that the company misclassified him and others as independent contractors and failed to pay them overtime for hours worked in excess of forty hours in a single workweek. The parties stipulated for conditional certification.  Eighteen individuals joined the case as opt-ins.  The opt-ins then began filing individual arbitration demands with the American Arbitration Association, relying on an arbitration provision contained in an independent contractor agreement they signed with DMS before they began working for the company.  

DMS then filed a “Motion To Enforce Arbitration Agreement,” asking the Court for an order compelling the individual arbitration demands to be consolidated into a single arbitration case.  The Court refused to order the arbitrations to be consolidated, finding:

There can be no presumption in favor of class arbitration based upon mere silence in the arbitration agreement. Silence regarding class arbitration is indicative of prohibition. DMS’s motion is premised solely upon the Arbitration Agreement it signed with McMillian in August of 2019. The Arbitration Agreement makes no mention of class arbitration. DMS fails to draw the Court’s attention to any provision in the Arbitration Agreement which supports its request that the Court order class arbitration. The record reveals no evidence McMillian or the opt-in class members have consented to class arbitration. With the Arbitration Agreement silent, there can be no finding that the parties have consented to class arbitration.

As such, the Court allowed the arbitrations to proceed individually.  This case is yet another reminder that arbitration, for an employer, can be a classic case of “be careful what you wish for.”  Arbitration is much more expensive than traditional litigation, because the parties have to pay for the finder-of-fact’s time – an arbitrator charges the parties by the hour, while a state or federal judge in traditional litigation is paid by taxpayers.  JAMS, the AAA, and other arbitration outfits refuse to move forward with an employment-based arbitration unless and until the employer pays the fees for the arbitration, including the arbitrator’s fees.  Individual arbitrations can often cost tens of thousands of dollars, in addition to the attorney’s fees the company must pay its own attorneys.  So it is easy to see why DMS would want to consolidate 18 different arbitration proceedings into a single one.  The fees for the arbitrations alone can threaten to impose a crushing cost on the employer.  

About the author: Josh Borsellino is an attorney that represents workers suing for unpaid overtime.  If you have questions about overtime pay, call Josh at 817.908.9861 or email him here for a free and confidential consultation.  

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