Source: https://www.pbwt.com/ny-commercial-division-blog/unless-the-u-s-supreme-court-rules-otherwise-waivers-of-collective-actions-are-not-enforceable-in-new-york/
Timestamp: 2019-04-19 20:51:13+00:00

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The plaintiffs in Gold were former insurance agents for N.Y. Life who filed a putative class action against N.Y. Life and related companies for allegedly violating overtime and minimum wage laws. The plaintiffs had signed standardized contracts, providing that they were independent contractors, and thus not employees of N.Y. Life. N.Y. Life maintained a ledger for tracking commissions payable to each agent, and charged back certain amounts depending on whether a policy was surrendered, foreclosed, or lapsed within a certain period of time. One of the plaintiffs, Kartal, signed a contract waiving any right to a jury trial and agreeing that no claim could be brought or maintained “on a class action, collective action or representative action basis either in court or arbitration.” The contract also provided that if the arbitration provision was found to be unenforceable, then the class, collective or representative claim could proceed in court.
Justice Sherwood of the Commercial Division granted N.Y. Life’s motion to compel arbitration of Kartal’s claims, and separately, granted a motion for summary judgment dismissing the wage deduction, failure to pay overtime, and failure to pay minimum wage claims.
On appeal, the First Department concluded that the arbitration provision in Kartal’s contract -- which prohibited class, collective, or representative claims -- violated the National Labor Relations Act (“NLRA”), 29 U.S.C.§ 151 et seq., and was therefore unenforceable. The Court recognized that the issue was an open question in New York courts and that the Federal Circuit Courts were split on the point.
The First Department comprehensively surveyed existing case law on the enforceability of arbitration provisions prohibiting class, collective, or representative claims in an employer-employee context. For example, the Seventh Circuit had declined to enforce an arbitration clause that precluded employees from bringing class, collective, or representative actions because it violated the NLRA’s provisions that allow employees to organize and engage in “concerted activity.” The U.S. Supreme Court recently granted certiorari in that appeal. The Ninth Circuit followed the Seventh Circuit approach, but the Second, Fifth, and Eight Circuits have enforced arbitration provisions requiring employees to waive class or collective actions.
The First Department disagreed with the Fifth Circuit’s approach of extending the Supreme Court’s holding in the consumer contract context to agreements with employees. In AT&T Mobility, LLC v. Concepcion, 563 U.S. 333, 352 (2011), the Supreme Court held that the Federal Arbitration Act (“FAA”) requires courts to enforce waivers of class arbitration in consumer contracts. Nonetheless, the First Department could “divine no reason” why the policy imperatives of the FAA which require enforcement of arbitration contracts FAA should supersede the policies underlying the NLRA that prohibit employers from preventing collective action by employees.
Recognizing that the U.S. Supreme Court would “[i]n all likelihood . . . resolve this circuit split in due course,” the First Department decided that “[i]n the meantime” it would follow the Seventh Circuit’s approach of holding waivers of collective claims unenforceable under the NLRA.
The First Department’s decision went on to affirm the portions of the Commercial Division’s decision that granted summary judgment dismissing the wage deduction and minimum wage claims.
On October 2, 2017, the U.S. Supreme Court will hear oral argument on the Seventh Circuit and Ninth Circuit appeals, which have been consolidated for review. A ruling is expected in the October 2017 Term.
 Lewis v. Epic Sys. Corp., 823 F.3d 1147 (7th Cir. 2016), cert granted, 137 S. Ct. 809 (2017).
 Morris v. Ernst & Young, LLP, 834 F.3d 975 (9th Cir. 2016), cert granted, 137 S. Ct. 809 (2017); but see Cellular Sales of Mo., LLC v. NLRB, 824 F.3d 772, 775-76 (8th Cir. 2016); D.R. Horton, Inc. v. NLRB, 737 F.3d 344, 355-62 (5th Cir. 2013); Sutherland v. Ernst & Young, LLP, 726 F.3d 290, 297 n.8 (2d Cir. 2013).
 Gold, 2017 BL 247192, at *5.

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