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The end of wage / hour class actions?

I hate to write this piece.  Really.  I hate to spread the word about such an awful and harmful decision, but I have to.

The U.S. Supreme Court recently issued an opinion which, if used properly by employers, will mean the end to employee class actions for unpaid wages.  The case is called  AT & T Mobility. LLC v. Concepcion.  In it, Justice Scalia finds nothing wrong with a clause in a consumer contract which prohibits class actions against AT & T.  Concepcion will have to hire an attorney and file a lawsuit in court to recover the $30 that he claims AT&T owes him.  As for the rest of AT&T’s customers, they probably don’t realize they’ve been harmed and won’t make any claims.  The result will be that AT&T and other large companies will have the right to simply add small illegal charges to their contracts and get away with it because no one will sue.  They could literally put a charge on your bill called “we’re taking $30 of your money” and get away with it.  The Huffington Post has a pretty good piece on this horrible case.

Well, this ruling affects employees, too.  For decades, employees have used the power of section 216(b) of the Fair Labor Standards Act to pool resources and sue employers for unpaid overtime wages.  These claims are usually too small to bring individually and most employees don’t know their overtime rights.  The collective action provision allows an employee to notify other employees of the lawsuit and gives them a right to join.

Employers’ lawyers are now advising their clients to include this class action waiver language in their arbitration policies.  These waivers, if enforced, will likely defeat any motions for class certification of those lawsuits, either under the FLSA or state wage/hour laws.

There are two possible remedies.  First, Congress may pass legislation to reverse this decision.  This is presently unlikely since the House is under Republican control.

Second, employers might not put arbitration agreements in their employee handbooks in the first place.  There are pros and cons of arbitration agreements.  The biggest con for employers is that they have to pay all costs and fees, including the hourly fees of the arbitrator(s).  These fees can and usually do run into the tens of thousands of dollars.  So, a relatively small case, say worth $20,000, will cost an employer its own defense costs plus the arbitrator’s fees.  This provision will double the defense costs.  This fact has almost always induced employers to settle small cases with me for near full value, even though they claimed that the suit was meritless.  So, maybe employers who don’t have arbitration policies won’t write them because it will cost them too much to defend small suits.  At least at the moment, this is not the advice that defense attorneys are giving.

Oh well.  Scalia did it again.  The little guy has lost his/her right to bring wage hour collective or class actions.   The rich get richer, and the working man loses.