California Fast-Food Firm Facing 10k+ Mandatory Employment Arbitration Claims Seeks Reprieve

Wage theft is a serious problem in California. As Los Angeles wage and hour lawyers, we have seen this play out in almost every industry and at nearly every level of employment, but it tends to occur most often to the most vulnerable workers. The fast-food industry is no exception. One way that companies try to sidestep the worst outcomes in these cases is to, where possible, bar workers from banding together in class action litigation. This is achieved through mandatory employment arbitration agreements, which have largely been upheld by the courts, up to and including the U.S. Supreme Court, via an early 20th Century law known as the Federal Arbitration food wage theft

However, using this tactic in a series of California wage theft lawsuits may have backfired in the case of one national fast-food chain, according to The Los Angeles Times. The story begins as so many do: Large, chain employers cutting corners of labor laws and allegedly committing wage theft is fairly common, as is the practice of mandatory employment arbitration. What makes the recently-highlighted situation different is that in trying to shield itself from a class action litigation for wage theft, the company may have effectively shot itself in the foot.

This particular fast-food chain has some 2,300 restaurant locations nationally, and it’s been battling some 10,000 claims of wage theft for the last six years. Last summer, the company won its motion filed in a federal court in Colorado to compel some 2,800 workers who filed lawsuits to instead participate in mandatory employment arbitration. However, employment lawyers for the company may now be wondering if this was the smartest move because now it is facing tens of thousands of individual arbitration proceedings across the country – proceedings it is compelled to pay for itself and which could cost tens of thousands of dollars each. The alternative of a class action lawsuit may not seem so burdensome considering it would require a single group of lawyers in one location, rather than thousands scattered before abitrators across the U.S. As it now stands, according to The Times, approximately 150 claims have been filed.

One employment lawyer for the workers asserts it wasn’t the workers who sought this outcome; rather it was the company. Late last year, the fast-food chain asked the federal judge in Colorado for reprieve for the flood of arbitration filings, seeking to suspend them all, arguing that mounting a defense for all individually  could result in irreparable harm to the company. Defendants also asked that several law firms representing the employees be disqualified. The judge recently denied both of those motions, calling the company’s efforts in this regard merely attempts to obfuscate and delay arbitration – moves that at this point, the judge noted are simply “unseemly.”

The whole point of arbitration from the perspective of defendants, the judge pointed out, was to avoid congesting the courts and instead pursue a more efficient means of dispute resolution. (And let’s not forget too of course that these venues are favored by large companies precisely because they tend to benefit large companies against consumers and/ or employees, which in contrast are relatively powerless.

Most Los Angeles employment attorneys, including our own, generally consider them a scourge. It was considered a major victory when the previous administration signed off on an executive order barring firms with federal contractors in excess of $1 million from forcing into arbitration claims of workplace sexual harassment, assault or discrimination. There was also a rule passed by the federal Consumer Financial Protection Bureau preventing credit card and banking firms from mandating consumers engage in mandatory arbitration. Both measures were overturned by the new administration.

In this fast-food wage theft case, the judge called the firm out in mid-2105 for “procedural folderol” (or trivial nonsense) he called uniquely “torturous” to plaintiffs who had waited two years for action on their claims without getting anywhere. This was despite the fact the claims were relatively simple matters, allegations the managers required them to work unpaid by automatically clocking workers out prior to the end of their shifts. Back pay ranged from a few hundred to several thousand dollars each.

Workers sought class-action litigation but the company had instituted a mandatory employment arbitration clause for all new employees hired in mid-2014 and on. In all likelihood they thought this would shield them from workplace wage theft claims. Arbitration has to be handled in the county where each worker was employed, as opposed to collective class action cases, which can be filed at the location of corporate headquarters. Of course, most workers don’t even remember signing the arbitration agreements, as most are buried somewhere in the mass of documents all new workers must sign or else forego employment.

The question of whether such clauses were even enforceable was up for debate until the U.S. Supreme Court last year issued its 5-4 ruling in Epic Systems vs. Lewis requiring workers to accept such provisions as an employment condition. It might be difficult for individual claimants to find wage theft attorneys willing to represent them on claims worth no more than a few thousand at most, but some 700 workers in the pending fast food wage theft claims already had secured representation by lawyers who were initially gearing up for a class action lawsuit. The fast-food chain is attempting to put those claimants back to square one, though, by disqualifying their attorneys, arguing they signed up clients for litigation whom they knew were subject to the arbitration clauses. The judge declined to remove them, saying enforceability of those mandatory arbitration clauses was still in question at the time.

It would appear the company is attempting to have it both ways – forcing arbitration and then arguing arbitration imposes to great a burden on its firm. So far, the judge isn’t buying it.

Contact the employment attorneys at Nassiri Law Group, practicing in Orange County, Riverside and Los Angeles. Call 949.375.4734.

Additional Resources:

Chipotle may have outsmarted itself by blocking thousands of employee lawsuits over wage theft, Jan. 4, 2018, By Michael Hiltzik, The Los Angeles Times

More Blog Entries:

California Wage Theft Attorney: Call-In Shift Counts as “Reporting to Work”, Nov. 21, 2018, Los Angeles Wage Theft Attorney Blog

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