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