The Latest Twist in Overtime Lawsuits Against Accounting Firms

Here's an interesting development in the wage and hour disputes between public accounting firms and their unlicensed staff. The Second Circuit Court of Appeals recently found that "class action waivers" included in offer letters to new associates are enforceable. What does that mean exactly? The case Sutherland v. Ernst & Young provides the background:

“Alyssa” worked as an audit employee responsible for training and “low-level clerical work” for Ernst & Young, LLP in New York from September 2008 through December 2009 at a fixed salary of $55,000 per year. Upon accepting the job, Alyssa signed an offer letter stating that any “dispute … arising between myself and the firm will be submitted first to mediation and, if mediation is unsuccessful, then to binding arbitration.”
In other words, there was an explicit process laid out in the offer letter that explained how disputes between the firm and an employee are dealt with:
 
Step 1: Get someone impartial involved to help resolve the differences because, let's be adults about this.

Step 2: Get someone impartial involved who will make a decision because people don't want to be adults about this.

 
Pretty standard. But then there's this:
An attachment described the firm’s alternative dispute resolution program, which provided that “neither the firm nor an employee will be able to sue in court in connection with a covered dispute,” and “covered disputes pertaining to different [employees] will be heard in separate proceedings.”
Okay, so this is the part where the firm said, "Hey, if you have a problem with us, fine. But we're not going to let you drag other people who claim to have the same problem into this mess." By signing this offer letter, Alyssa gave up the right to rally a bunch of people to her cause. 
 
Be that as it may, Alyssa argued that going solo was not an option:
After a year on the job, Alyssa filed a lawsuit claiming she was misclassified as exempt and seeking $1,867 in unpaid overtime wages under the Fair Labor Standards Act (FLSA) and New York labor law. She also sought class certification for other clerical employees. Alyssa argued that she could not “effectively vindicate” her rights in individual arbitration because the cost would far exceed her potential recovery, with estimated attorneys’ fees of $160,000, personal costs of $6,000, and expert testimony fees of $25,000.
The district court agreed with this argument based on the Second Circuit's rulings in In re American Express Merchants’ Litigation (Amex I-III)1 and said that the waiver prevented Alyssa from rightfully pursuing the claim. EY didn't like this and appealed, naturally. That's when the Second Circuit overturned the district court's decision citing a recent SCOTUS case:
“Amex I and the subsequent decisions that followed in our Circuit are no longer good law in light of the [U.S.] Supreme Court’s recent decision in American Express Co. v. Italian Colors Restaurant.”
 
In Italian Colors, the Supreme Court held that “the fact that it is not worth the expense involved in proving a statutory remedy does not constitute the elimination of the right to pursue that remedy,” and reminded lower courts to “rigorously enforce arbitration agreements according to their terms.”

That last part is tough but what SCOTUS said, and what the Second is applying to Sutherland, is that it doesn't matter if Alyssa can't "effectively vindicate" that "the cost would far exceed her potential recovery" because an agreement is an agreement and therefore, the terms should be enforced.

On the one hand, the decision seems logical and it just goes to show how meticulously crafted those offer letters are. On the other, this does not look good for the plaintiff in this case and will hold a lot of repercussions in any future claims. 

In short: read those offer letters closely. None of the terms are likely to be a dealbreaker for you, but it's best to be aware of the conditions that come with your employment.   

1 Go here for some good background but the gist is "the U.S. Court of Appeals for the Second Circuit held [...] that an arbitration clause is void if individual arbitration would make it financially unfeasible for a plaintiff to vindicate federal statutory rights."

Court of appeals: Class action waivers are enforceable [hr.blr.com]

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