There has been a great deal of litigation about class action waivers in Employee Handbooks and use of arbitration mechanisms in Employee Handbooks to preclude judicial litigation. A recent New Jersey federal case sheds more light on this thorny issue, and the decision favors employers. The case is entitled Essex v. The Children’s Place and was filed in federal court in the District of New Jersey.

In October 2014, the Company developed an arbitration program that applied to all Associates working at retail stores in the United States. The Company used an intranet portal to communicate with Associates. To gain access, Associates used an employee identification number and personal password. Since October 2014, the Portal included The Mutual Agreement to Arbitrate Claims.

When the Company introduced the arbitration program, it sent Associates already working for the Company received a message through the Portal, directing them to review the Arbitration Agreement. That message explained “it is important that you review the Arbitration Agreement carefully” and that “[w]e expect all Associates to review and sign the Arbitration Agreement. However, because it is not a mandatory condition of your employment, you may elect to opt out and not be subject to the Arbitration Agreement.” Associates hired after October 2014 reviewed the Arbitration Agreement following orientation. The Arbitration Agreement included a class, collective, and representation waiver.

An Associate who declined to accept the terms of the Arbitration Agreement filled out an Opt Out Form, which was also located on the Portal. Of the 377 Store Managers who filed consent to join the lawsuit, 209 of them signed and submitted the Arbitration Agreements. These employees were not required to participate in the arbitration program as a condition of employment and the Arbitration Agreement expressly provided that signing the Arbitration Agreement was not a mandatory condition of employment.

The Court ruled that the Arbitration Agreement had a clear “opt out” provision. The Court noted that numerous Plaintiffs who opted into the case first opted out of the Arbitration Agreement. Thus, it was clear that the arbitration agreement had an opt-out clause and that “[s]uch a provision can hardly be construed to interfere with, restrain, or coerce an employee into forfeiting the rights afforded by § 7 of the NLRA”).  The Defendant conceded that the forty-nine Plaintiffs who did opt out of the Arbitration Agreement were not subject to this motion to compel. Thus, the Court dismissed the case as concerned those Plaintiffs who did not opt out of the arbitration provision.

The Takeaway

This is a very instructive case for employers. The defense works! In how many of my postings am I talking about magic bullets or an easy, quick, cheap way out of a FLSA collective action (at least for many of the opt-in workers).

Well, here is a real good one…

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