In several recent posts (click here or here), we’ve focused on court decisions that found arbitration clauses and class action waivers unconscionable (unfair) and unenforceable in the context of consumer class actions. Today, we highlight an arbitration clause decision that arose in a different context: the employment class action.
In Arrigo v. Blue Fish Commodities, Inc., the plaintiff sued his employer, Blue Fish Commodities, for failure to pay overtime pursuant to the federal Fair Labor Standards Act and New York Labor Law. The plaintiff brought his action in federal court. Blue Fish moved to have the case arbitrated because the plaintiff signed an employment agreement that contained an arbitration clause. The court dismissed the action and sent it to arbitration.
On appeal, the Second Circuit affirmed. In doing so, the court declined to reach the plaintiff’s argument that the arbitration clause was unconscionable and should not be enforced against him. The agreement stated that the arbitrator would have “exclusive authority” to resolve any dispute concerning the enforceability of the agreement. Based on the language in the arbitration clause, the court held that unconscionability was for an arbitrator, and not for the court to decide. So, although the plaintiff advanced a strong argument to show he had no choice but to sign the contract—that Blue Fish forced him to choose between signing and losing his job—the court did not believe it was in a position to decide the question. More than eighteen months after commencing his case, the plaintiff must now start over again in arbitration.
The lesson from Arrigo is that an employee should learn about the meaning of each term in an employment agreement before signing it. Employers have the upper hand in these situations. Mr. Arrigo signed his employment agreement three months after he began working. In an “at will” employment state like New York, an employer can fire an employee at any time unless the employee has a contract that says otherwise. Employers may have attorneys draft employment agreements, and these agreements may have terms that are favorable to the employer and come back to haunt an unsuspecting employee in the event of a dispute. Before you sign an employment agreement, do the research on your own or consult an attorney, if possible.