A Federal Court in New York recently agreed with an Arbitrator’s award permitting the employees to seek their New York Labor Law (“NYLL”) and Fair Labor Standard Act (“FLSA”) claims on a class-wide or collective action basis, despite the arbitration agreement not expressly giving the employees this option.  The employees worked as tipped, hourly food service workers at their employers’ restaurants.  During their employment, the employees received a handbook with a dispute resolution policy (“DRP”) and they also received a dispute resolution agreement (“DRA”).  Both the DRP and the DRA stated that all claims arising out of the employment with the restaurant, including labor law violations, must be submitted to final and binding arbitration.  Also, both the DRP and the DRA did not mention anything pertaining to whether employees can bring their claims as a class or collective proceedings.  In deciding this issue, the Court had to consider whether (1) the parties submitted to the Arbitrator the question of whether the agreement permitted class arbitration and (2) whether the Agreement or the law prohibited the Arbitrator from resolving the issue.  The Court does not look to whether the Arbitrator correctly decided the issue, but whether the Arbitrator relied on the arbitration agreement and applicable law in making its decision.

In this case the employers argued that since it was undisputed that both the DRP and DRA were silent on the issue that meant that the employees were prohibited from presenting their claims in class arbitration.  However, the Court stated that the parties must agree that the agreement did not explicitly or implicitly give authority for class arbitration; not just that there was no mention of class arbitration in the agreement.  Since there was no evidence of mutual intent by the employees and the employers regarding class arbitration, the Court reasoned that the Arbitrator had authority to grant class arbitration because the language of the agreement gave the employees permission to bring “all claims” arising out of their employment and the Arbitrator had authority to “decide all claims according to law, [and] may award all damages and relief allowed by law..”  The Court also agreed with the Arbitrator’s reasoning that since class action relief is clearly allowed under the NYLL and collective action relief is authorized under the FLSA, the DRP and DRA permit a claim to proceed as a class or collective action.  More so, courts have found class action waivers in arbitration agreements to be unenforceable because it prohibits employees from exercising their statutory rights under the FLSA.  The collective action provisions of the FLSA protect the workers who have claims that would be too small to litigate because of the costs of litigation.  The Court found that both parties asked the Arbitrator to decide whether class arbitration was allowed and found that the Agreement and any applicable law did not prohibit the Arbitrator from resolving the issue.  Therefore, the Arbitrator did not exceed its authority in granting class arbitration.