Tag Archives: Arbitration agreements

12.16.24
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Don’t Get Jailed Because of Your Fat Friend: More Tips on Arbitration Agreements and Joint Employment

A South Korean man was sentenced to one year in prison for binge eating and getting too fat.

It isn’t always illegal to get fat in South Korea, but it is if you do it to dodge mandatory military service, which is what this guy did. His friend, who created the weight-gain plan, was sentenced to six months for aiding and abetting. Yes, really. And his defense was that he didn’t think his friend would go through with it.

One criminal eater, but two men end up in the pokey. Getting in trouble for what someone else does sounds exactly like joint employment.

One issue that often arises in litigation is whether arbitration agreements apply to all defendants in a joint employment dispute. If a plaintiff has an arbitration agreement with his main employer but sues two companies as joint employers, can the second company rely on the first company’s arbitration agreement to get the whole case moved to arbitration?

Sometimes yes, but courts are split. It’s going to depend on the relationship between the parties and how the arbitration agreement is drafted. Let’s quickly address each of those points.

1) Courts are split.

In a recent California case, a grocery store employee sued his employer and a related entity for wage and hour claims. He argued that both were joint employers. He had an arbitration agreement only with the primary employer.

The California Court of Appeal (2d district) ruled that the arbitration agreement required the claims against both parties to go to arbitration. The plaintiff was not allowed to allege that the parties were so interrelated as to be joint employers, but too distinct for both to be covered by the arbitration agreement. The outcome may have been swayed by the close corporate relationship between the defendants. The outcome could be different if the alleged joint employers were unrelated, such as in a staffing agency relationship.

A few years earlier, however, the California Court of Appeal (1st district) reached the opposite conclusion, finding that a non-signatory to an arbitration agreement could not enforce it.

2) It depends on how the agreement is drafted.

The best way to avoid this problem is to draft arbitration agreements to take the joint employment risk into account. Be thoughtful when defining the scope of covered claims and covered entities.

The agreement should apply to claims against the primary employer and related entities, as well as managers, supervisors, etc. Also consider adding third-party beneficiaries.

If employees will be providing services to another entity, such as in a staffing agency relationship, make sure those services are covered.

If your company is receiving the services and another company is the primary employer, check to see whether there’s an arbitration agreement in place, and review its scope.

If I am representing the company receiving the services, I like to require that as a condition of being allowed access to the property (or receiving confidential information, or whatever else), each individual must sign an arbitration agreement that covers claims against the company receiving the services. These can be short, one-page arbitration agreements. If drafted correctly, they do not suggest that there is any employment relationship.

Takeaways

  • Individual arbitration agreements with class waivers are a great way to avoid class action exposure and keep disputes out of public courts — but only if their scope is broad enough to cover the claims and parties.
  • If you are the company receiving services, ask the primary employer whether there are individual arbitration agreements in place and ask to see them.
  • Require anyone providing services, even if not your employee, to sign a contract agreeing to arbitrate claims, and make it a condition of being allowed to work on the property.
  • And most important of all, never help a skinny Korean get fat to avoid military service.

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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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05.20.24
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No Clash: Supreme Court Rules Cases Must Be Stayed When Sent to Arbitrtaion

Darling, you got to let me know
Should I stay, or should I go?

These lines open the 1981 hit single “Should I Stay or Should I Go” by the Clash. Slight correction, according to Genius lyrics, the opening lines of the song are “Oh! Hola!” which is kind of fun.

Should I stay or should I go is the question the Supreme Court answered last week regarding arbitration cases. In January, we previewed this pending case.

The case involves independent contractors who sued, alleging misclassification. The contractors had signed individual arbitration agreements, and the business successfully moved to compel arbitration. If there is an arbitration agreement, the Federal Arbitration Act (FAA) will generally apply (subject to some exceptions), and the district court must refer the case to arbitration.

This technical question then arises: Does the court dismiss the case or merely issue a stay?

It matters. A dismissal can be immediately appealed. An order to stay typically is not appealable.

The Supreme Court ruled that, under the FAA, a court is required to stay a case when granting a motion to compel arbitration. The court cannot dismiss the case.

So, stay. Not go.

This outcome is required under the text of the statute. The effect is that an order granting a motion to compel arbitration is not immediately appealable. The federal court case gets stayed, not dismissed; so there is no appeal. If you’re the party moving for arbitration, that’s good.

On the other hand, if a motion to compel arbitration is denied, the party moving to compel arbitration can appeal — even though the case remains with the district court. That’s because the FAA and case law allow for this immediate appeal.

So here’s the decision tree for how things must proceed after a motion to compel (MTC):

1. If MTC is granted, the court case gets stayed. The losing party cannot immediately appeal.

2. If MTC is denied, the case remains in court, but the losing party can immediately appeal.

There is no longer an option for the court case to be dismissed when the MTC is granted.

Turns out then, it’s not really true that If I go there will be trouble, If I stay it will be double. At least not if we’re talking about motions to compel arbitration. Something tells me, though, that’s not what the Clash were singing about.

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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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03.04.24
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Don’t Horse Around: Here Are Three Agreements You Should Have on Your Shelf

Police in Wejherowo, Poland arrested a 19-year-old man for stealing a horse. The man was caught after neighbors reported that he was trying to lead a horse up the stairs to his third floor apartment.

Why would someone do that? Apparently he was trying to conceal the horse and thought his apartment would make a good hiding place. (After all, who would look in a third-floor walk up for a missing horse?) But getting the horse to the apartment was the man’s undoing.

He didn’t think through his plan. Don’t be like that man. Today’s post is to help you think through your plan in advance, but in the context of retaining non-employee labor, not stealing a horse.

I generally recommend having three types of agreements in your stable of documents. (Heh heh, see what I did there?) Each serves a different purpose and contains different features, even though there is often some overlap.

1. Independent Contractor Agreement. This should be crafted for use with solo independent contractors (1099s), regardless of whether there’s a single member LLC or a sole proprietorship.

The goal here is limit the risk of misclassification, that is, a finding that the worker is really your employee.

The agreement should identify and memorialize the facts that support IC status, such as that the company retains no right to control how the work is done, where it’s done, when it’s done, steps, sequence, etc.

If there are lots of ICs doing the same thing, individual arbitration agreements with class waivers can be highly useful to include too, as they reduce the downside risk of misclassification.

2. Vendor Outsourcing Agreement. This document is for when a function is entirely outsourced, such as in the hospitality industry, where it is common to outsource the housekeeping function.

There are two goals here.

One goal is to memorialize the facts that will help avoid a finding of joint employment. These workers should be managed independently of your company’s employees and should not be directly supervised by your managers.

The second goal is make it difficult for a disgruntled worker of the vendor to allege joint employment, and there are various tools in the toolbox to help accomplish this objective.

3. Staffing Services Agreement. This document is to be used when a third party provides staff augmentation services or other workers who are commingled with your employees or supervised by your managers. In this scenario, there’s a reasonable risk of joint employment.

We want to use the contract to build defenses.

First, we want to lay the groundwork for a claim against the vendor if the vendor fails to pay its employees in accordance with the law.

Second, we want to throw obstacles in the way of anyone who might want to bring a joint employment claim. Individual arbitration agreements with class waivers are helpful in that regard.

If you’re working with a staffing agency, the form they provide you is not likely to help limit your legal risks. It’s always better to start with your own form.

Don’t Horse Around

Agreements provided by your vendors are unlikely to provide you with any meaningful protections. Different agreements have different purposes, and these three agreements should each be used in different situations.

It doesn’t work to use a staffing agreement with outsourced employees, and it doesn’t work to use an independent contractor agreement with outsourced labor employed by the vendor. Those workers aren’t independent contractors at all; they’re employees of the vendor. The legal risk you’re trying to address is whether you’re a joint employer. That’s a very different legal question than whether the worker is misclassified.

So be sure to use the right kind of agreement for the right kind of situation.

That means planing ahead and having the right forms on hand, ready to go. As our friend in Wejherowo learned the hard way, you’ve got think all the way through your plan in advance.

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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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01.29.24
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The Clash: Supreme Court to Decide About Arbitration in a Misclassification Case

The 1982 release by the Clash asked, “Should I Stay or Should I Go?” The song included backing vocals in Spanish, but since none of the band members spoke Spanish, they had tape operator, Eddie, call his mother, who was Ecuadorian. Eddies’ mom translated the backing vocals into what we hear on the recording (Yo me enfrio o lo soplo).

The Supreme Court agreed last month to address the same question — should I stay or should I go? — but in a different context.

The case involves independent contractors who sued, alleging misclassification, the contractors had signed individual arbitration agreements, and the business successfully moved to compel arbitration. So far, this is all very ordinary.

But when a court sends a case to arbitration, should it stay the case or dismiss it? Different federal courts handle this differently. There’s a good ol’ fashioned circuit split, and the Supreme Court will decide whether courts have the discretion to dismiss cases instead of merely staying them.

Why does it matter? In most cases, it won’t matter. But there are varying points of view. A dismissed case can be appealed; the decision to stay a case usually cannot. A stayed case may require updates to be filed; a dismissed case does not. A stayed case may lead to a streamlined order adopting the arbitrator’s decision; a dismissed case would require a new filing.

Sometimes cases have claims that are subject to arbitration and claims that are not. In those instances, a stay is probably the only logical option. When the arbitration is done, the court will decide the remaining claims. But when all parties have agreed, by contract, that their dispute must be arbitrated, many courts see no basis for staying the case, and they dismiss it.

The textualist argument is that a stay is the only way to go (see what I did there?). Section 3 of the Federal Arbitration Act says that a court, “shall on application of one of the parties stay the trial of the action until such arbitration has been had….”

But if there’s no dispute that the court can hear, because all parties have agreed to arbitrate disputes, then there’s nothing left for the court, and dismissal would seem proper.

We’ll continue to watch this case. The Supreme Court will likely hear the matter in late 2024.

In the meantime, This indecision’s buggin’ me (esta indecisión me molesta).

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© 2024 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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10.23.23
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It’s Not Lemon Juice: Here’s the One Key Ingredient Missing from Your Staffing Agency Agreements

In 1995, a man robbed two Pittsburgh banks during the day. He wore no disguise and was easily identified by surveillance cameras and arrested. This surprised the man.

The man was surprised because he had covered himself in lemon juice, and he believed that lemon juice made him invisible to video cameras. Obviously, it doesn’t and it didn’t. Lemon juice does not prevent a person from being seen.

Now let’s talk about staffing agency temps and being seen. If your temps are integrated into your workforce, there is a high likelihood you are a joint employer.

If your staffing agency temp improperly pays your temp, and the temp files a wage and hour claim, you can’t just drench yourself in lemon juice and hope not to be seen. Chances are, you’ll be sued too.

If you are a joint employer, you are likely liable for wage and hour violations by the staffing agency, even though you had no control over the staffing agency‘s pay practices. For liability purposes, their mistake is your mistake.

One of the best ways to avoid getting drawn into a class action filed by an agency temp is to require, in your staffing agency agreements, that all temps sign an individual arbitration agreement. All temps should be required, as a condition of being placed at your company, to agree that any claims they have against your company will be resolved in arbitration, on an individual basis, not through a class action.

How do you do this? In three parts.

First, insert in your staffing agency agreement a clause requiring that all temps placed at your facility must first signed an arbitration agreement, a copy of which will be attached to the staffing agency agreement.

Second, draft the individual arbitration agreement exactly the way you want it, and attach it to the staffing agency agreement as an exhibit. Include a class waiver. Consider allowing small claims to be carved out and resolved in small claims court. Consider omitting AAA or JAMS as a designated arbitration administrator, to reduce the risk of mass arbitration filings. You can require arbitration without designating any agency to administer it. The agencies charge high fees, which creates the leverage that makes mass arbitration an effective tool of the plaintiffs’ bar. No arbitration agency = no administrative fees = probably no mass arbitration.

Third, require the agency to maintain copies of these agreements. You want the ability to audit compliance. You can also require the agency to show you a copy of each signed agreement before each temp begins an assignment.

It is frustrating to think that your business could be jointly liable for wage and hour violations by a staffing agency when you have no control over how they pay their employees. But with joint employment, that risk is a reality. You need to prepare for that possibility well in advance.

The staffing agency agreement provides you an ideal opportunity to plan ahead and protect yourself against this possibility.

Lemon juice might be a nice addition to iced tea, but it does not provide any protection against security cameras or class action lawsuits. You’ll need arbitration agreements for that.

Click here for more tips about what should be in your staffing agency agreements.

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© 2023 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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07.24.23
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Cry If You Want To: Individual Arbitration Agreements Can’t Stop PAGA Claims

A Nigerian comedian recently set out to beat the world record for continuous crying, seeking to cry for 100 consecutive hours. I expect that many new parents would object right here and point out that this record is bullsh@# because their infants have cried continuously for twice that long. But let’s assume the record here is for adult crying. Lacking the stamina of a newborn, the comedian failed miserably.

After six hours, the man experienced headaches, a swollen face, and lost his vision for 45 minutes.

A California Supreme Court decision last week may cause businesses to shed a few tears, but the ruling was no surprise, and companies just need to be prepared.

Remember how we love individual arbitration agreements as a tool for avoiding class action lawsuits? Companies that make widespread use of independent contractors should have these agreements in place, and most do. Courts generally enforce these agreements, which require claimants to bring any claims on an individual basis, not as part of a class action.

In California, there was an open question about whether an individual who is subject to an individual arbitration agreement could nonetheless bring a PAGA claim in California. PAGA refers to the Private Attorneys General Act, a California state law that allows “aggrieved individuals” to bring a claim on behalf of the state government, seeking relief for other employees. It’s not a class action but, to a defendant company, it feels like one.

In Adolph v. Uber, the California Supreme Court ruled that an individual whose claims are subject to an individual arbitration agreement may still be considered an “aggrieved employee” who can bring a PAGA claim seeking to remedy a defendant’s Labor Code violations against other employees.

The ruling was no surprise to the business community, but it clarifies an important point of law. You can read more about the decision here, in this BakerHostetler alert.

Businesses do not need to do anything differently on the preventive side, as a result of this ruling.

Businesses making widespread use of independent contractors should continue to require the contractors to sign individual arbitration agreements with class action waivers. While these agreements cannot prevent PAGA claims, they can often be used to delay PAGA claims. The agreement can include a clause requiring the parties to jointly request that any PAGA claim be stayed while the individual claim is arbitrated. This delay may frustrate the purpose of the PAGA claim, especially if your business prevails in arbitration against the individual.

So for now, nobody needs to follow the lead of the temporarily blind Nigerian comedian. Instead, follow the advice in this song:

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© 2023 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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07.10.23
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Not 1925: Another Court Upholds Arbitration Agreement for Rideshare Driver Misclassification Disputes

In 1925, the first motel opened in San Luis Obispo, California, according to The People History. It was originally called the Milestone Mo-Tel and charged $1.25 per night. The term motel was created to shorten the phrase Motorists’ Hotel, the defining feature of which was the ability of visitors to park their vehicles directly outside their room.

Why are we focused on 1925? Because laws written in 1925 continue to directly impact legal disputes over misclassification in 2023, even though the facts being applied to those laws were so far beyond what lawmakers could have even imagined at the time. The application of outdated laws is something we deal with all the time, including with the Fair Labor Standards Act, enacted in the 1930s. The intersection of old laws with new technologies creates sticky legal problems. And today’s post is about one of these sticky situations.

In a recent decision, the Third Circuit Court of Appeals joined the First, Seventh, and Ninth in ruling that rideshare drivers with individual arbitration agreements are required to arbitrate misclassification disputes, as set forth in the Federal Arbitration Act (FAA). In other words, the FAA’s transportation exception does not apply.

I’ll explain why that’s important, and you’ll see where 1925 fits in.

For companies engaging large numbers of independent contractors, misclassification class actions pose a significant risk. Individual arbitration agreements with class action waivers provide important protections against that risk. Generally, the FAA requires the enforcement of arbitration agreements.

But the FAA has an exception. Under section 1 of the FAA, the Act does not apply to “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”

Historically, this exception was created because seaman and railroad workers were subject to a different set of federal requirements for dispute resolution. Remember, the FAA was enacted in 1925. People still said “seaman” without giggling.

In 1925, Calvin Coolidge was sworn in for a full term, in the first inauguration to be be broadcast on the cutting-edge new technology of radio. The Scopes Monkey Trial captivated the nation, following the indictment of Tennessee schoolteacher John Scopes for daring to teach human evolution. In other Tennessee news, the Grand Ole Opry debuted on Nashville radio, with the less-catchy name, the “WSM Barn Dance.”

So this was a different time. No one was thinking you could order a car on your cell phone, track your route on your cell phone, then pay and rate your driver by cell phone. In 1925, we were still a year away from the first trans-Atlantic phone call.

Anyway, plaintiffs’ lawyers attempting to bring misclassification class actions frequently argue that rideshare drivers fall within the transportation exemption, and therefore the FAA does not require enforcement of the drivers’ signed arbitration agreements. In Singh v. Uber Transp., a three-judge panel in the Third Circuit held that the transportation exception does not apply (and therefore the FAA does apply) because the vast majority of rides were intrastate, not interstate. The decision was issued in April, but there was a petition asking for a rehearing by the full circuit. Earlier this month, that petition was denied, and the Third Circuit’s decision therefore will stand, assuming there is no Supreme Court review.

The takeaway for companies making widespread use of independent contractors is to continue to use arbitration agreements, even in industries that may involve transportation. The scope of the transportation exemption is constantly being tested, but so far for rideshare, the outcome of most court decisions has been that the FAA still applies and the transportation exception does not apply.

For those interested in how the opening story ends, the Milestone Mo-Tel was renamed the Motel Inn, then closed in 1991. The building is now the administrative building for the Apple Farm Inn next door. The Apple Farm Inn charges a bit more than $1.25 per night, but it promises “the excitement of creating future memories.”

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© 2023 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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04.10.23
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No Suction: The DOL Doesn’t Care About Your Arbitration Agreements with Independent Contractors

In Japan’s Aomori Prefecture, bald men compete annually in a Suction Cup Tug of War. In each round, two contestants attach suction cups to their heads and pull in opposite directions. The person whose cup detaches first is the loser.

The event is sponsored by the Tsuruta Hagemasu Association, which aims to shed positive light on male baldness. The Association’s website, which I cannot read because it is Japanese, includes several hilarious/serious photos, including one of six elderly gents with flags suction cupped to their heads. Only the guy on the far right seems to be in on the joke. The others seem deadly serious about what their heads can do.

Using your head to win is not unique to the Suction Cup Tug of War. Well, maybe it is unique to the Suction Cup Tug of War if we take that in the most literal way, but now I’m straying into the figurative so that I can transition from something absurd to something topical.

Using your head to win independent contractor misclassification disputes often involves relying on individual arbitration agreements, which can help to prevent class action lawsuits. But the DOL is using its head too, and it’s pulling in an opposite direction. When the DOL pulls against your individual arbitration agreements, the DOL is going to win. The arbitration agreement will lose its stickiness.

Recent DOL news releases have highlighted the Department’s success in prosecuting misclassification cases, even when the target company had its independent contractors sign arbitration agreements. The DOL, in other words, doesn’t care about your arbitration agreements. The DOL is not a party to those agreements, and the DOL isn’t bound by them.

While an individual contractor can waive the right to file a lawsuit, the DOL is not waiving that right. The DOL can — and will — bring misclassification claims against companies that use arbitration agreements. I’m not suggesting that having arbitration agreements makes businesses a target for enforcement; I have seen no evidence of that. My point is just that arbitration agreements have their weak points, and the major weak point is that they do nothing to prevent a government agency, state or federal, from conducting an audit or bringing an enforcement action.

The US DOL, state labor departments, state unemployment agencies, and state and federal tax services have all made misclassification an enforcement priority.

Businesses should keep using arbitration agreements with their independent contractors, but be aware that these agreements do not protect against all mass enforcement activity. The stickiness of these agreements is useful, but when the DOL pulls in the opposite direction, the suction cup is probably coming off your head.

For those of you wishing you could have been there, here’s a video of the 2023 Suction Cup Tug of War. After some bizarre preliminaries, including tournament officials and a young girl throwing wet paper rectangles at the competitors’ heads, the thrilling tug of war action begins at about 1:20 into the clip.

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© 2023 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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02.13.23
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Today’s Tip: Do Look Back, When Drafting Arbitration Agreements

“Don’t Look Back” was the title track on Boston’s second album, released in 1978. The album version came in at six minutes, but a radio edit brough it down to four.

This is a practice I never understood. People used to listen to the radio for hours at a time, but six minutes was too long for one song? Why is it better to ingest two three-minute songs per six minutes than one six-minute song? But maybe I’m the wrong person to ask. My idea of an excellent album is Tales from Topographic Oceans by Yes. The album consists of four songs, each about 20 minutes long, and was inspired by a footnote in a book about Hindu texts by the yogi Paramahansa Yogananda.

But this is getting way off track.

I chose “Don’t Look Back” as the theme for today’s post because it’s good advice for life, but bad advice for drafting arbitration agreements.

For businesses that make widespread use of independent contractors, one of the best strategies for protecting against misclassification claims is by having a robust arbitration agreement with a class action waiver. But too many times those agreements don’t look back.

Lately I’ve seen a couple of decisions in which arbitration agreements were found not to cover particular claims, when those claims arose from events that happened before the agreement was signed. I think those cases were wrongly decided, since arbitration covers the process for resolving disputes, regardless of when they arise. But it makes good sense to draft in a way that cuts off this line of attack.

I have recently started adding a sentence to my arbitration agreements that goes something like this: “Covered disputes also include disputes relating to past events, including those that predate this Agreement.”

Today’s tip is to go back and look at your arbitration agreements. If they aren’t clear about covering claims based on earlier events, consider adding this clarification next time you update the agreement.

Now for those of you who would like an earworm for the day, here you go:

Don't look back, ooh, a new day is breakin'
It's been too long since I felt this way
I don't mind, ooh, where I get taken
The road is callin', today is the day

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© 2023 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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05.09.22
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Not Dead Yet: Arbitration Agreements May Sit Dormant, But They Can Still Save You From a Class/Collective Action

Not dead yet. @SCMPNews

This spring has been a bad time for injured civilians who prefer not to be buried alive.

In Peru last month, a funeral procession was interrupted when the 36-year old car accident victim was heard banging on the lid of her coffin, trying to get out. Days earlier the woman had been pronounced dead, in what turned out to be an unfortunate mispronunciation.

In Shanghai, a nursing home mourned the passing of an elderly resident, who was placed in a body bag and sent to the mortuary. As seen in this video taken by a bystander, the mortuary workers unzipped the bag and found the man still moving. He was transferred to a hospital, which seems to me like a more appropriate place for someone still alive.

People may go quiet, but that doesn’t mean they should be treated as dead. The same holds true for individual arbitration agreements. They may exist quietly in the background, but courts can’t just ignore them, as a recent Fifth Circuit Court of Appeals decision made clear.

A plaintiff alleged violations of the Fair Labor Standards Act (FLSA), claiming she was misclassified as an independent contractor and therefore was denied overtime pay. She asked the court to treat her lawsuit as a collective action, claiming that other contractors were also misclassified and were also denied overtime pay. In FLSA cases, plaintiffs have to opt in to join the class. The district court approved the distribution of opt-in notices to similarly situated contractors, letting them know about the lawsuit and their right to participate.

The defendant opposed the notices, pointing out that the contractors had all signed individual arbitration agreements that included class action waivers. They couldn’t opt in, the defendant argued, so they should not get the notice. When the court approved the notices anyway, the defendant filed a writ of mandamus with the Fifth Circuit Court of Appeals, asking the appeals court to intervene and stop the notices from going out.

The Fifth Circuit granted the writ and stopped the notices from going out. The Court of Appeals ruled that the arbitration agreements required all disputes to be resolved through individual arbitration, and therefore the contractors could not opt in to the lawsuit. Since they could not opt in, they could not be sent notices inviting them to opt in.

It’s unusual for a Court of Appeals to grant a writ of mandamus. But here, the Court of Appeals recognized that the arbitration agreements were very much alive, even if the contractors who signed them were silent in the background.

This case is a good reminder of the value of individual arbitration agreements with class action waivers. A well-drafted arbitration agreement will require all claims to be resolved on an individual basis and will include a waiver of the right to participate in any class or collective action. The agreement should also deprive the arbitrator of jurisdiction to preside over a class or collective action.

Businesses that rely on independent contractors should check their agreements and consider adding robust, carefully-drafted arbitration clauses.

Arbitration agreements can sit silently in the background for years, but that doesn’t mean they are dead.

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© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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