Arbitration Not Always the Answer

The battle over whether individual arbitration agreements can prevent class actions was settled with the decision in Epic Systems v. Lewis, 138 S.Ct. 1612 (2018). That decision found that workers who signed individual arbitration agreements with his/her employer could not later file suit as a class or collective action. Employers viewed this decision favorably. But, now, maybe not so much.

See what has happened with what was intended to be a collective action against Chipotle. In 2014, Chipotle started requiring workers to sign arbitration agreements. Some 2800 Chipotle workers signed mandatory arbitration agreements. They tried to file a collective action in Denver based U.S. district court. Chipotle invoked the individual arbitration agreements. The judge agreed the claims should be heard in arbitration. But, then Chipotle tried to bar the plaintiff law firm from representing the individual plaintiffs in arbitration. The employer’s rationale was that since the workers received notices of a collective action from the law firm, that law firm should not represent them. In some way, argued the Chioptle lawyers, the plaintiff law firm had compromised the interests of the potential plaintiffs. The court quickly dispensed with that specious argument. See Reuters news report.

The defense lawyers warned the judge that there may be thousands of follow-on arbitrations. The lawyers suggested the plaintiff law firm had tried to leverage thousands of arbitrations to protect its lawsuit. But, replied, the judge, “Absent more concrete evidence of legal incompetence or evidence demonstrating a clear pattern of abuse of the judicial process, I will not interfere with the arbitration plaintiffs’ right to choice of counsel.” In other words, the judge said the employees can pick the counsel they desire.

Chipotle incurs a fee of $1100 per employee, just to file the arbitration. JAMS is providing the arbitration services and their rules require the employer to pay the fees. That ruling in Denver federal court occurred in April, 2018.

Now, in December, 2018 some 150 of those workers dropped their attempted collective action and re-filed individual arbitration claims. So far, Chipotle has refused to pay much of those fees. The plaintiff law firm notes the individual claims amount to no more than about $1,000 per worker. Ordinarily, the plaintiff lawyers would not be interested in pursuing those claims. But, since they worked up much of the evidence for what they thought would be a collective action, they have pursued these 150 claims. See Huffington post here.

And look what happened to a Florida paving contractor in 2018. There were three claimants in that arbitration. The contractor was eventually hit with a bill for $100,000 in arbitral fees. Those three former employees also tried to sue in federal court first. The employer refused to pay the fees and tried to go back to federal court. Be careful what you ask for, because you just might get it.

Leave a Reply