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Massachusetts Joins Jurisdictions Prohibiting Class-Wide Arbitration of Wage Claims Absent Agreement Expressly Permitting Class Actions

Posted on: May 18th, 2020

By: Kevin Kenneally, Janet Barringer and William Gildea

In a further blow to class action claimants and lawyers, a Massachusetts Superior Court Judge recently ruled a car salesman could not arbitrate Wage Act claims on behalf of coworkers absent an express provision in the employment agreement permitting such a class action.   In Grieco Enterprises, Inc. v. McNamara, the employer sought a declaratory judgment ruling that an employee could not arbitrate wage claims on behalf of a putative class of employees even if his employment contract was silent on the issue and did not expressly prohibit or allow for such a class action. This favorable outcome for employers and insurers follows a similar 2019 ruling by the Supreme Court of the United States holding an ambiguous employment agreement cannot be the basis to compel class-wide arbitration.

In the Massachusetts state court arbitration matter, the employee claimed his employer failed to pay him—and others—required overtime and Sunday-hours premium in violation of state wage laws.  He demanded arbitration on behalf of himself and other similarly-situated commission-only salespeople.  In response, the employer filed the declaratory judgment action in Massachusetts state court seeking determination whether a class action in this instance is permissible.  The Massachusetts Superior Court held class action arbitration is not permissible because the parties’ employment agreement did not expressly permit employees to arbitrate class actions.  The Court held the employee may proceed to arbitration solely on an individual basis. 

The decision in McNamara is garnering attention due to the state’s decision last year concerning commission-based salespeople, Sullivan v. Sleepy’s LLC.  In Sleepy’s, the Massachusetts Supreme Judicial Court held commission-paid retail salespeople are entitled to “time-and-a-half” overtime compensation based on the statutory minimum wage — even when their commissions always met or exceeded the state minimum.  Sleepy’s specifically held the overtime and Sunday premium wage statutes applied to commission-paid sales staff.  The McNamara claimant sought to apply this ruling to an entire class of workers rather than having each worker bring an individual claim.  The employment agreement at issue contained a general statement in the agreement it was “in conformity with” Massachusetts Rules of Civil Procedure—which claimant contended includes procedural rules for class actions, thus tacitly subjecting the employer to class arbitration.  The Superior Court rejected the argument and held the parties to the contract did not expressly agree to engage in class action arbitration.  The judge in McNamara held that if she were to permit the application of an unclear provision to authorize class actions, “unrepresented employees could be bound by an arbitration that he or she did not individually consent to participate in.  Such a result is contrary to the legal underpinnings for arbitration, specifically that it is a consensual contractual matter.”

In 2019, the U.S. Supreme Court decided Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407, 587 US __, 203 L. Ed. 2d 636  (2019), which was seen as a setback to workers’ ability to join or aggregate the individual claims of other workers who had agreed in their employment contracts to an arbitration forum.  Lamps Plus held in claims subject to the Federal Arbitration Act (“FAA”) an ambiguous agreement cannot be the necessary contractually-agreed basis to force an employer to submit to class-wide arbitration.  The high court agreed with the employer there simply was no foundational agreement to arbitrate the class action and the lower court acted contrary to the primary purpose of the FAA.  Lamps Plus held a lower court may not compel arbitration on a class-wide basis when an agreement is “silent” on the availability of such arbitration and “that private agreements to arbitrate are enforced according to their terms.”  

Employers who incorporate arbitration provisions in their employment agreements for individual basis only will benefit by the uniform application of law in both state and federal courts.  Employers in Massachusetts have certainty absent a specific provision – or even in the face of a vague arbitration provision – class-wide arbitration will not be available to employees whether the claims are based on federal or state law.

If you have questions or would like more information, please contact Kevin Kenneally at [email protected], Janet Barringer at [email protected] or William Gildea at [email protected].

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