Arbitration provision not retroactively enforceable in FLSA case

A federal judge in Houston struck a cost-sharing provision in an arbitration clause and limited the time period covered by the clause in ruling on the defendant’s motion to compel arbitration of claims asserted under the Fair Labor Standards Act.  Several workers sued Global Fixture Services, Inc. (“Global”) for overtime pay.  Each Plaintiff signed contractor agreements with Global. Each of the agreements provided that “[a]ll claims and disputes between Contractor and [Global] arising under the terms of this Agreement or in any way related to this Agreement shall be exclusively resolved through arbitration governed by the Federal Arbitration Act.” The agreements further provided that “[Global] and Contractor each waive any rights they may have to pursue or participate in a class or collective action pertaining to any arbitral claims between each other.” 

The plaintiffs did not dispute that they signed arbitration agreements with Global. Instead, they argued that because “the arbitration clauses require Plaintiffs to bear half of the prohibitive costs of arbitration” and because “Plaintiffs do not have the financial wherewithal to exercise their rights in this fashion[,]” the arbitration clauses were unconscionable under Texas and federal law. Plaintiffs also argued that “the arbitration agreements are limited in time and do not fully cover all time periods for which Plaintiffs have claims.”

The court first found that the cost-splitting provision of the arbitration clause was unconscionable, citing the high cost of arbitrations and finding that the Plaintiffs lack the overall ability to pay those arbitration costs, and the cost differential is large enough that it would likely deter bringing the claims. As such, the court struck the cost-splitting provision, meaning that the defendant to pay the arbitration costs.  

The Court next addressed the Plaintiffs’ arguments that the contracts containing arbitration clauses only cover certain periods of their work for Global. The court noted that “courts have generally held that standard language providing for arbitration of claims ‘arising under or relating to this agreement’ does not apply retroactively.” As a result, the court found “Because the preexisting FLSA claims are not related to the subsequent Agreements, and because relevant prior cases have not applied this arbitration language retroactively, the court will not compel arbitration as to the FLSA claims that accrued prior to the terms of the Agreements.”  Thus, only the FLSA claims that arose after the contracts containing the arbitration provision were compelled to arbitration.  The remaining claims arising before contract execution were not subject to arbitration.  

Employers are increasingly using arbitration provisions in an effort to limit their liability under the FLSA.  If you have worked within the past three years and have been denied overtime pay, speak with an experienced overtime attorney as soon as possible to learn of your legal rights.  Josh Borsellino represents workers on claims for unpaid overtime.  For a free, confidential, no-obligation consultation, call Josh Borsellino at 817.908.9861 or email him using this link.  

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