Role of arbitration agreements in unpaid overtime lawsuits

The role of arbitration agreements in lawsuits seeking unpaid overtime and minimum wage under the Fair Labor Standards Act (“FLSA”) is a heavily litigated issue. A case from Colorado has shed some light on the breadth of arbitration agreements. In Peck v. Encana Oil & Gas, Inc., 224 F.Supp.3d 1811(D.C. CO, 2016), the plaintiff worked as an oil and gas well site supervisor for the defendant, Encana. The plaintiff alleged that he was misclassified as an independent contractor and was denied overtime pay for all hours worked over 40 hours in violation of the FLSA. After the plaintiff stopped working for the defendant, a company called Greene Energy Group, LLC had entered into a Master Service Agreement (“MSA”) with the defendant. The MSA detailed that Greene was responsible for furnishing the services of all personnel and supervisors required to complete the work, which the defendant claimed the plaintiff provided services to the defendant pursuant the MSA. Id. The MSA also contained a mandatory arbitration provision that required any disputes between the parties to be settled by arbitration. The defendant moved to compel the plaintiff to arbitrate his FLSA claims but the plaintiff claimed that because he was not a signatory to the MSA, he was not governed by it.  

The defendant argued the doctrine of equitable estoppel bared the plaintiff from pursuing his claims because the claims arose out of the MSA. Specifically, the defendant contended that the plaintiff’s relationship with the defendant existed only as a result of the MSA. The answer lied in Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 129 S.Ct. 1896, 173 L.Ed.2d 832 (2009), where the court said that arbitration provisions are governed by state law relating to contracts generally. In Peck, the parties agreed that “a signatory to an arbitration agreement may compel a non-signatory plaintiff to arbitrate a claim, so long as the claim arises from an agreement containing an arbitration provision and the plaintiff seeks the benefit of that agreement.” Peck v. Encana Oil & Gas, Inc., 224 F.Supp.3d 1811(D.C. CO, 2016). 

The Tenth Circuit recognized that, in the arbitration context, a party may be estopped from asserting that the lack of a party’s signature on a written contract precludes enforcement of the contract’s arbitration clause where the plaintiff has consistently maintained that the other provisions of that contract should be enforced to benefit him. Lenox Maclaren Surgical Corp. v. Medtronic, Inc., 449 Fed.Appx. 704 (10th Cir. 2011). Thus, a signatory plaintiff “cannot, on the one hand, seek to hold the non-signatory liable pursuant to duties imposed by the agreement, which contains an arbitration provisions, but on the other hand, deny arbitration’s applicability because the defendant is a non-signatory.” Id. 

In Peck, it was clear that the MSA did not “form the legal basis” of the plaintiff’s claims nor were his claims dependent on the contract. Rather, the FLSA formed the legal basis for the plaintiff’s claims. The defendant argued that but for the MSA, the plaintiff would not have worked for the defendant and therefore would not be able to assert his FLSA claims. The court found this unpersuasive. Simply put, the fact that the MSA may be “factually significant” to  the plaintiff’s claims is not enough to bind a party to an arbitration clause he did not sign. Weller v. HSBC Mortg. Servs., Inc., 971 F.Supp.2d 1072 (D. Colo. 2013). The plaintiff’s actual claims did not depend on the MSA thus his claims were not subject to arbitration. While the MSA entered into by Greene and the defendant contained a mandatory arbitration clause, which was broad enough to cover the FLSA claims, the plaintiff was not a signatory to that agreement and he did not agree to arbitrate his claims. Thus, the doctrine of equitable estoppel did not require the plaintiff to arbitrate his claims and the arbitration clause contained within the MSA did not apply to the plaintiff, so the plaintiff was allowed to litigate his FLSA claims in federal court rather than in arbitration. 

Are you an oilfield worker who has questions regarding your unpaid overtime rights? If so, consider speaking with an experienced FLSA attorney today to learn your next steps. Josh Borsellino is a FLSA attorney that understands arbitration clauses and the implications they can have on your unpaid overtime claims. He offers free consultations and can be reached at 817.908.9861 or 432.242.7118.  

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