The Limits of Arbitration Agreements in Minimum Wage and Unpaid Overtime Cases in Georgia

In many fields of employment, an employer may seek to obtain its employees’ signatures or agreements in which those workers sign away their right to sue in court for certain claims, such as unpaid overtime or minimum wage disputes. In place of a trial in court is a hearing before an arbitrator or arbitration panel. Employers insist on these agreements because, often, proceeding in arbitration as opposed to litigation works to the employer’s benefit and to the employee’s detriment. That’s why you should proceed with substantial care before such a waiver of your rights and, if you have questions or concerns, get in touch with a knowledgeable Atlanta minimum wage lawyer.

Not only can an agreement place you in the position of contesting your underlying claims before an arbitrator, but even the arguments you raise about the enforceability of the arbitration agreement itself may also have to be contested in that same arbitration setting.

That was the bad news for some workers who sued in federal court in New York alleging they were illegally underpaid. The plaintiffs were workers at various locations of a center that spread the teachings of Kabbalah. These were workers who, when they joined the center, signed vows of poverty. They received “cash allowances or monthly stipends,” housing, food, and clothing. They received no other compensation for their work.

Eventually, several of these workers left the center and sued for minimum wage and unpaid overtime violations of the Fair Labor Standards Act. The workers, when they left the center, each signed a separation agreement that contained an arbitration clause. The workers contended that the arbitration agreements were unenforceable because they contained unconscionable terms, and were the products of fraud, duress, and/or coercion.

The problem for the workers is the way that these kinds of disagreements are resolved. The agreements they signed gave the arbitration tribunal the authority to decide not just the underlying dispute (in this case, the alleged payment of illegal sub-minimum wages and non-payment of overtime compensation,) but also disputes about the validity and enforceability of the arbitration clause itself.

Your Employer Cannot Demand That You Split the Fees and Costs of Arbitration

One thing your employer cannot do — at least, here in Georgia — is force you to arbitrate your minimum wage or unpaid overtime claims, then force you to split the costs of that arbitration. In 2019, the 11th Circuit Court of Appeals shot down an arbitration agreement’s provision dictating that any “dispute arising out of this agreement shall be resolved by mediation or arbitration, each party agrees, the parties will equally divide cost of mediation. Each party to any arbitration will pay its own fees and expense, including attorney fees and will share other fees of arbitration.”

The court said that the provision impermissibly insulated the employer from the risk of paying costs and fees in the event it lost the case, illegally restricted the arbitrator’s discretion in determining which side pays fees and costs, and wrongfully required employees to give up recovering attorneys’ fees in cases where they succeeded.

There is wide latitude when it comes to constructing the terms of a contract. If you sign a broad, sweeping arbitration agreement, you run a considerable risk that the courts will enforce it against you… although there are exceptions. Whether you are weighing signing such an agreement, seeking options for avoiding arbitration, or needing to contest a wage-and-hour matter in arbitration, get in touch with the experienced Atlanta minimum wage attorneys at the law firm of Parks, Chesin & Walbert. We’ve spent years helping workers who received sub-minimum wages or didn’t receive overtime they earned, and we’re eager to help you get what the law says you deserve. Contact us through this website or at 404-873-8048 to schedule a consultation.

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