Texas court refuses to enforce arbitration provision in overtime suit

A federal court in San Antonio recently refused to enforce an arbitration provision in an overtime lawsuit filed by nurses against their former employer.  Plaintiffs alleged that Defendants failed to pay their registered nurses and licensed vocational nurses overtime wages for time worked in excess of forty hours per week, as required by the FLSA.  In response, the Defendants asked the Court to dismiss the case and order the Plaintiffs to arbitration.  Defendants argued that the case was subject to binding arbitration based on arbitration agreements signed by Named Plaintiffs as a condition of their employment with Defendants.  The Court found that while Defendants met their burden of demonstrating that the parties entered into a valid arbitration agreement, the agreement unambiguously excluded class and collective actions from its scope, and thus Defendants’ motion to compel arbitration was denied.

The arbitration provision in question stated:

This mutual agreement to arbitrate claims means that both you and the Company are bound to use the EDR Program as the only means of resolving employment-related disputes and to forego any right either may have to a jury trial on issues covered by the EDR Program. However, no remedies that otherwise would be available to you or the company in a court of law will be forfeited by virtue of the agreement to use and be bound by the EDR Program. This Program covers only claims by individuals and does not cover class or collective actions.

Plaintiffs argued that the plain language of the provision excluded class and collective actions, and given that the suit was filed as a collective action, the arbitration provision did not apply to the lawsuit.  The Defendants, on the other hand, claimed that the phrase “does not cover class or collective actions” should be interpreted not to exclude such actions from arbitration, but to waive an employee’s right to participate in such actions altogether.  The Court found that “Defendants’ interpretation of this unambiguous sentence is creative but tortured,” and refused to give this interpretation credence.  The Court found, “The highlighted language constitutes unambiguous waiver language regarding the employee’s right to a jury trial on covered issues and follows that explicit waiver language with an equally clear clarification that the employee is not waiving any other rights he or she would otherwise have in a court of law, which would include a right to proceed collectively. The Disputed Sentence cannot be construed as a collective or class action waiver in this context without reading waiver language into the parties’ agreement that simply does not exist, which is even more troubling when considered in light of the drafting employer’s obvious ability to be explicit about waiving employee rights. The Disputed Sentence is the only mention of class or collective actions in any of the documents governing the EDR Program. Thus, it is not as if that final sentence could be read in conjunction with some other language regarding a plausible waiver of class and collective action rights.”  As such, the Court denied the motion to compel arbitration.  

Employers often attempt to insulate themselves from perceived liability from overtime laws by enacting mandatory arbitration provisions.  However, these arbitration provisions are often poorly drafted, selectively enforced and/or one-sided, and they are not always enforceable.  Even if they are enforceable, they do not prevent a worker from enforcing his or her legal rights regarding overtime pay.  If you have been required to sign an arbitration agreement after being denied overtime pay, consult with an experienced overtime attorney regarding your legal rights.  Josh Borsellino represents workers to get them the overtime pay they deserve.  Call Josh at 817.908.9861 or 432.242.7118 or fill out this form for a free consultation.  

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