Wage Hour Litigation Blog | Seyfarth Shaw Law Firm

Time 2021-06-03 11:13:37

Web Name: Wage Hour Litigation Blog | Seyfarth Shaw Law Firm

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11:00 a.m. to 12:00 p.m. Mountain10:00 a.m. to 11:00 a.m. PacificClassifying workers properly to comply with wage-hour and fair employment laws is an important aspect that many businesses are already aware of, but misclassifying workers may have unintended effects to other legal interests, including non-competes and other restrictive covenants. In this third installment of our 2021 Trade Secrets Webinar Series, our team outlines the connections between wage and hour law and restrictive covenant law.The panel will discuss:State restrictive covenant laws that expressly or by inference incorporate federal or state wage and hour lawsState restrictive covenant laws that impose compensation thresholds for enforcement of non-compete agreementsTips for drafting restrictive covenants in independent contractor agreements to avoid misclassification claimsPros and cons of mandatory arbitration clauses in employment agreements in wage and hour and restrictive covenant litigationREGISTER HERESpeakersDaniel Hart, Partner, Seyfarth Shaw LLPKevin Young, Partner, Seyfarth Shaw LLPCary Burke, Associate, Seyfarth Shaw LLPIf you have any questions, please contact Colleen Vest at cvest@seyfarth.com and reference this event.This webinar is accredited for CLE in CA, IL, NJ, and NY. Credit will be applied for as requested for TX, GA, WA, NC, FL and VA.  The following jurisdictions accept reciprocal credit with these accredited states, and individuals can use the certificate they receive to gain CLE credit therein: AZ, CT, ME, NH.  The following jurisdictions do not require CLE, but attendees will receive general certificates of attendance: DC, MA, MD, MI, SD.  For all other jurisdictions, a general certificate of attendance and the necessary materials will be issued that can be used in other jurisdictions for self-application. To request CLE credit, fill out the recorded attendance form linked above and return it to CLE@seyfarth.com. If you have questions about jurisdictions, please email CLE@seyfarth.com. CLE credit for this recording expires on May 24, 2022.On Thursday, May 20th at 1:00 p.m. ET / 12:00 p.m. CT / 10:00 a.m.  PT , Seyfarth attorneys Brett Bartlett, Noah Finkel, Kerry Friedrichs, and Scott Hecker will present a webinar entitled Navigating Wage and Hour Risks Under the Biden Administration.In February 2021, Seyfarth s Wage Hour Litigation Practice Group published the inaugural edition of the FLSA Handbook. The handbook not only summarizes the substance of the federal wage and hour laws but also provides guidance for employers’ responses to investigations as well as checklists for conducting self-audits. It is intended to provide a ready resource on frequently encountered issues arising in the rapidly evolving wage and hour compliance space.Join members of Seyfarth s Wage Hour Litigation and Government Relations Policy Practice Groups for a deep dive on this important resource. As we provide a curated look at wage and hour considerations for employers under the new administration, specific topics covered will include:The Biden Effect on FLSA Enforcement by the Federal Wage and Hour Division ( WHD )How to Respond to a WHD Investigation16(b) Litigation TrendsMitigating Wage and Hour Risks: Best Practice Pointers for Conducting an Effective Self-AssessmentClick Here for More Information and to Register. By: Robert Whitman and Bill VaradeSeyfarth Synopsis: In Whiteside v. Hover-Davis, Inc., the Second Circuit upheld the dismissal of an FLSA claim because the plaintiff failed to allege facts sufficient to invoke the three-year limitations period for willful violations.If a plaintiff merely alleges a willful violation of the Fair Labor Standards Act (“FLSA”), without more, will that suffice to invoke the FLSA’s three-year statute of limitations for willful violations?  The Second Circuit said “No” when it recently affirmed a district court’s dismissal of a plaintiff’s overtime violation claim.The case was not without controversy, though, as the court had to navigate a circuit split on this issue, and a split between the districts courts within the Second Circuit.  Further, the opinion generated a forceful dissent, which suggests this matter, although settled in the Circuit, may rise again at the Supreme Court one day.Case BackgroundThe plaintiff, Mark Whiteside, worked for years at Hover-Davis as a Quality Engineer, a salaried, non-exempt position.  In January 2012, an unnamed manager asked Whiteside to switch to Repair Organization Technician, an hourly, non-exempt position.  Whiteside regularly worked 45-50 hours at his new position, but never received overtime pay.  However, his salary remained the same as before this change.Whiteside was terminated in 2018 when Hover-Davis ceased manufacturing the product he worked on.  He then commenced suit, alleging, among other claims, that he was not paid overtime wages from January 2012 to January 2016 in violation of the FLSA.Although his claim fell outside the FLSA’s two-year limitations period, Whiteside tried to save his untimely claim by alleging that the company’s violation was willful, and that he should benefit from the FLSA’s three-year statute of limitations for willful violations.  However, the district court disagreed, dismissing his claim because (1) his claim was untimely under the FLSA’s two-year statute of limitations, and (2) he failed to allege facts raising an inference of a willful violation.The Second Circuit AffirmsTo resolve this pleading issue, the Second Circuit considered two previously laid paths.  Both the Tenth and Sixth Circuits had encountered this issue before, but came to opposite conclusions.The Tenth Circuit allows a plaintiff to merely allege a willful violation in order to benefit from the longer statute of limitations.  The Sixth Circuit, however, requires that a plaintiff plead facts raising a plausible inference that a willful violation has occurred.  Further, the district courts within the Second Circuit disagreed on the proper approach, with some judges following the Tenth Circuit’s approach and others following the Sixth’s.Ultimately, the Second Circuit followed the Sixth Circuit, holding that “willfulness operates as an independent element of claims for willful violations of the FLSA,” because such claims subject an employer to heightened liability.  “[R]equiring FLSA plaintiffs plausibly to plead willfulness” upholds the distinction between ordinary and willful violations of the FLSA.  Thus, it was “incumbent on the plaintiff to plead facts that make entitlement to the willfulness exception plausible.”Here, willfulness could not be inferred from the fact that Whiteside was asked “to perform job responsibilities typically performed by non-exempt employees even though he was classified as exempt.”  Furthermore, he failed to allege any details “suggesting an awareness of impropriety” on behalf of defendant or any of defendant’s managers.  So, the Second Circuit said he had failed to allege sufficient facts to benefit from the FLSA’s longer statute of limitations for willful violations.Dissent And Circuit Split Suggest This Issue May Rise Again This reasoning found support from only two of the three judges on the panel, and generated a forceful dissent by Judge Denny Chin.Judge Chin argued that at the motion to dismiss stage, a plaintiff need only “plausibly allege” a willful violation occurred.  Here, he said, Whiteside had done just that by alleging: (1) he was assigned to a non-exempt role; (2) his supervisor and manager knew he performed this role for years; (3) he regularly worked over 40 hours a week; and (4) he was never paid overtime.  This, Judge Chin said, could “support the inference that defendants were aware of their obligation to pay him overtime and . . . either intentionally or recklessly failed to do so.”While the dissent’s reasoning failed to carry the day, it suggests that this issue remains controversial.  Considering the current Circuit split, this issue could very well see review by the Supreme Court in the near future, perhaps in this very case.  But as it currently stands in the Second Circuit, the burden lies on “the plaintiff to plead facts that make entitlement to the willfulness exception [of the FLSA] plausible.”By Scott Hecker and Kevin YoungGone are the days when the U.S. DOL’s Wage Hour Division (“WHD”) invited employers to proactively identify and collaborate with the Division to fix their wage and hour missteps. Closed is the chapter in which employers could expect WHD to stand down on the threat of double damages outside of egregious cases. After years of a prior administration focused on compliance assistance, there’s a new guard at the DOL, and its approach thus far might be described as less carrot and more stick.We have observed the shift at WHD both through formal announcements and anecdotal experience. Mere weeks after the new administration’s arrival, the DOL confirmed its termination of the PAID program, which invited employers to conduct self-audits and work with WHD to remediate identified issues and provide back wage payments to employees. And just last month, the Division issued new guidance to its field staff confirming a reversal of prior policy that reserved the imposition of liquidated damages for rare and egregious cases.Unsurprisingly, these shifts in policy have been coupled, in our experience, with a change in the temperament and approach of many WHD investigators who knock on employers’ doors and pursue investigations. We’ve seen more investigators push for near-instantaneous document production, threatening use of subpoena power or imposition of civil money penalties and citing a regulation requiring employers to make documents available for inspection within 72 hours of WHD’s demand. Some have rapidly issued investigatory conclusions to employers, sometimes with document requests still pending, both in FLSA cases and in the prevailing wage law context. Demands that employers enter into compliance agreements drafted by WHD also seem to be increasing in popularity.Employers we work with are linked by their desire to do right by their employees and comply with the FLSA. Certainly WHD and its investigators want the same. But for many businesses, the change in approach at the Division, from policymakers at the top to enforcement agents in the field, presents a new type of pressure that demands a different level of preparedness.So what can employers do when facing increased pressure from WHD? Here are a few tips:Ensure that records are in order. WHD has broad authority to request FLSA-related records required to be maintained under 29 C.F.R. Part 516. All employers should take proactive steps to ensure that their records required under these regulations, as well as other documents pertinent to wage-hour compliance, are in good order so that they can be efficiently accessed and reviewed if the WHD comes knocking.Be prepared for the knock. Employers operating across multiple physical locations should ensure that front-line managers know what to do when an investigator from any government agency, including WHD, shows up in person, sends them a letter, or contacts them by phone. While investigators should be treated with the utmost respect, their inquiries should be promptly deferred to a pre-designated point of contact who can help coordinate a response. We encourage employers to carefully consider what their response team and protocols should look like.Be respectful and reasonable. Responding promptly and respectfully to an investigator’s inquiries should help limit fireworks in a potentially combustible situation. While WHD has fairly broad subpoena authority, it’s fair to question whether the Division would get much traction in court in the event that an employer isn’t objecting to or stonewalling an investigator’s requests, but is simply asking for a more reasonable approach, whether in terms of time to respond or the types of documents to produce.Seek counsel. With WHD becoming increasingly zealous with its demands—both in terms of what must be produced and when—the potential for business disruption and missteps is greater than ever. We strongly encourage employers to retain counsel familiar with these investigations to assist. Experienced and capable counsel can help to manage the flow of information and work with the investigator to identify efficiencies to avoid overburdening an employer’s personnel. When necessary, counsel can support employers who choose to contest WHD’s conclusions.Self-audit. The FLSA’s statute of limitations forces employers to live with missteps for two (and sometimes three) years, and the termination of programs like PAID makes it more difficult to resolve those missteps in a decisive way when they are identified. As a result, there’s no time like the present for employers to take reasonable steps to ensure compliance. The need is even greater in businesses where employees are performing different duties, or working in different settings or circumstances, as a result of the pandemic. Areas of focus will vary by business, but at a minimum they should include exempt classification, recordation of all hours worked, and proper calculation of overtime pay. As noted in our update last month, Seyfarth’s FLSA Handbook offers useful material on these topics, including:Chapter 14, “Compliance and Prevention Matters,” which provides an overview of steps employers can take to comply with wage and hour laws, and an outline to assist employers in structuring their own self-assessment process and to address any issues identified through that process.Chapter 7, “Exempt Employees,” which explains the most common, “white collar” minimum wage and overtime pay exemptions.Appendix 8, “Sample Job Assessment Questionnaire Form” which contains a practice and user-friendly set of recommendations to assist employers in reviewing exempt classifications.As President Biden’s appointees settle in at WHD, we expect to see ramped up enforcement not only under the FLSA, but also under the Davis Bacon Act, Service Contract Act, and other statutes in the Division’s wheelhouse. Prevailing wage laws may represent a particular area of emphasis, given the Biden Administration’s focus on infrastructure projects.In short, employers must be prepared for a shift in approach at the Division and be ready to demonstrate and defend their compliance. Please feel free to reach out to the authors or your friendly, neighborhood Seyfarth attorney with any questions.By: Noah FinkelSeyfarth Synopsis:  After delaying the effective date of a finalized Trump-era interpretive regulation that would have brought much needed clarity to the definition of employee under the Fair Labor Standards Act, the DOL yesterday formally repealed that guidance. The result is that companies, workers, and courts will continue to struggle in classifying which workers are employees and which ones can be independent contractors.Companies, workers, and courts long have wrestled with how to draw the line between an employee who is subject to various employment laws and an independent contractor who is not.  This confusion occurs at several levels:       Companies are subject to a hodgepodge of federal employment laws, many of which provide differing definitions of employee, or none at all;       States also regulate the employment relationship with varying sets of laws and a myriad of different tests to determine who is an employee;       Most tests for employee versus independent contractor are balancing tests that require a multi-factor analysis under which courts can balance those factors in various ways, often depending on the court’s particular jurisdiction or circuit;       The factors that are balanced under these tests often are open to many interpretations by each court; and       These tests for employee versus independent contractor usually were developed before the current era in which workers rarely retain one full-time job throughout their working years and need to be applied to a rapidly evolving economy.The DOL’s Proposal and Its Short TenureThe FLSA is among the oldest and most influential employment law statutes and yet it contains no statutory definition of employee. Until January 6, 2021, it had not contained a regulatory definition of the term.  That is when the DOL issued its final rule on “Employee or Independent Contractor Classification” in the waning weeks of the Trump administration.In that rulemaking, the DOL and consistent with case law and its own sub-regulatory guidance focused on whether, as a matter of economic reality, the worker is dependent upon the company for work or instead in business for him or herself.  In doing so, it set forth two core factors to be considered: (1) the nature and degree of the worker’s control over the work; and (2) the worker’s opportunity to earn a profit or loss.The rule further provided that, if both factors point toward the same classification, whether employee or independent contractor, then the worker is very likely to be that classification. If, however, those factors point in opposite directions, then three other factors should be considered: (1) the amount of skill required for the work; (2) the degree of permanence of the working relationship between the individual and the company; and (3) whether the work is part of an integrated unit of production.The rule, which was to be effective March 8, 2021, provided a simpler clearer analysis for determining whether a worker can be classified as an independent contractor under the FLSA. While there was no guarantee that judges would defer to it, it had the potential to be highly influential in courts and possibly harmonize how different circuits analyze whether a worker is an employee or independent contractor.But following the change in administrations, the DOL delayed the effective date of that rule, proposed withdrawing it, and then, yesterday, formally withdrew its prior guidance. Its main reason for doing so is that the rule elevated two factors the degree of control and the worker’s opportunity for profit or loss above other factors that historically had been considered, which the DOL considers in tension with the text and purpose of the FLSA. This is despite the fact that, in 2015 (the last time the DOL was under a Democratic administration), the DOL issued sub-regulatory guidance in the form of an Administrator Interpretation effectively changing the employee vs. independent contractor test from the historic economic realities test to one that focused on economic dependence.Barring successful litigation, the DOL’s independent contractor regulation is a dead letter.What Now and What Next?So what is now the test for employee versus independent contractor under the FLSA?  It is the same as it ever was:  a balancing test that varies from circuit to circuit, creating litigation results that often seem like they are dependent on each judge’s particular views.That may not be the case for long, as the DOL under President Biden is expected to issue its own interpretation of how it believes courts should define employee under the FLSA. It remains to be seen when that will occur, what form it will take (will it be by notice-and-comment rulemaking, amicus briefs, opinion letter(s), Administrator Interpretation, or other?), and what its substance will be.Many in the plaintiffs’ bar have advocated and will advocate for the DOL to adopt the so-called ABC test, which is used with some variations in several states for wage-hour purposes. The version of the ABC test that all but guarantees employee status in most scenarios (and which is currently used in California and Massachusetts), presumes that a worker is an employee unless the company can show that the worker is free from company control and direction in actual practice and per contract, performs work outside the company’s usual course of business, and the worker is customarily engaged in an independently established trade, occupation, or business. Federal adoption of this test, though, is unlikely. Even those who favor a broad definition of employee recognize that the ABC test could not be adopted by the DOL without legislation from Congress. Such legislation exists within the PRO Act, which has been passed by the House, but it is highly unlikely to make it out of the Senate.More likely, and particularly if, as rumored, David Weil is tapped to be Administrator of the Wage-Hour Division, the DOL will propose a standard similar to the one it issued in its 2015 Administrator Interpretation (which Dr. Weil authored). That standard focusing on economic dependence lacks the simplicity and clarity of the now repealed test and likely would be interpreted in a manner to render a greater number of workers employees than under various tests currently used in most circuits.The extent to which courts would defer to the DOL’s eventual replacement test is an open question.  The fact that the definition of employee is becoming one that depends on which party holds the White House and thus runs the DOL may make courts view any DOL test with skepticism and thus cause them to fall back on the same varying and elastic tests they have used over the last 80 years in the absence of a DOL definition of employee. The one certainty for independent contractor jurisprudence seems to be a lack of it.By: Ryan McCoy and Andrew PaleySeyfarth Synopsis: Back in January 2020, a federal district court enjoined the State of California from enforcing AB 5 against interstate motor carriers. Now, in a split 2-1 decision, a Ninth Circuit panel has reversed the district court, on the rationale that AB 5 is just another generally applicable labor law that affects all businesses regardless of industry, and is no different from many prior state laws the Ninth Circuit has upheld. Casting aside the dissent’s description of the wide-ranging impact that AB 5 would have on motor carriers, the panel majority held that the Federal Aviation Administration Authorization Act of 1994 (“FAAAA”) does not preempt AB 5. The district court’s injunction is expected to be lifted in the coming weeks. The panel’s decision could be subject to a rehearing en banc by the full Ninth Circuit, and eventually the U.S. Supreme Court will likely be asked to address the circuit split on whether the FAAAA preempts “all or nothing” state laws like AB 5. The District Court’s Injunction Prohibiting EnforcementOn January 16, 2020, a federal judge in the Southern District of California, following up on a temporary restraining order issued on December 31, 2019, granted the California Trucking Association’s request for a preliminary injunction blocking enforcement of AB 5 against interstate motor carriers. The district court found that AB 5’s ABC test destroys the historical owner-operator model, in direct contravention of the FAAAA, a 1994 deregulation measure that forbids any state law “related to a price, route, or service of any motor carrier … with respect to the transportation of property.” The district court concluded that the FAAAA “likely preempts ‘an all or nothing’ state law like AB 5 that categorically prevents motor carriers from exercising their freedom to choose between using independent contractors or employees.”The Ninth Circuit’s DecisionA  2-1 panel decision overturned the district court’s decision, effectively permitting the State of California to enforce AB 5 against interstate motor carriers who have long contracted with truck drivers who are owner-operators. The panel majority rejected the district court’s analysis, reasoning that AB 5 is like other state laws (such as those regarding meal and rest periods) that the Ninth Circuit has upheld as generally applying to all industries as opposed to a targeted group. The panel majority concluded that AB 5 is a generally applicable labor law that, while affecting a motor carrier’s relationship with its workforce, is not aimed specifically at the trucking industry.The panel majority threw out the district court’s finding that the FAAAA preempted AB 5’s enforcement against interstate motor carriers, because AB 5 does not “bind, compel, or otherwise freeze into place the prices, routes, or otherwise freeze into place the prices, routes, or services of motor carriers,” as required for FAAAA preemption.The DissentA lengthy dissent by Judge Mark Bennett faulted the panel majority for failing to consider the full scope of AB 5’s impact on interstate motor carriers, including the impact on their customer relationship and services. AB 5, Judge Bennet argued, differs from the prior state laws of general applicability that the Ninth Circuit has upheld. AB 5 establishes an “all or nothing” rule for interstate motor carriers and mandates how motor carriers must engage with their workers. Judge Bennett cited the district court’s finding that Prong B was the “Achilles heel” of AB 5 for interstate motor carriers because AB 5 makes a truck driver an employee unless the motor carrier proves that the driver “performs work that is outside the usual course of its business.”Finally, in an evident effort to garner attention from the U.S. Supreme Court, Judge Bennett pointed out the circuit split that the panel majority has created, in that other Circuits have ruled that the FAAAA preempts “all or nothing” statutes.Motor Carriers Should Examine Current Practices While Keeping A Close Eye On Further DevelopmentsThe Ninth Circuit did not immediately lift the injunction, but one can expect the injunction to be lifted by court order in the coming weeks, which would permit California agencies to enforce AB 5 against motor carriers. The panel’s decision could be subject to a rehearing en banc by the full Ninth Circuit, and eventually one might expect that the Supreme Court will be asked to weigh in on the issues raised by the appeal, especially in light of Judge Bennett’s characterization of a circuit split on “all or nothing” rules.”By: Louisa J. JohnsonToday marks two additional efforts by President Biden’s Administration to reverse the Trump Administration’s rulemaking. This time, two U.S. Department of Labor rules that were both published in the Federal Register as final rules before President Biden’s inauguration are in the crosshairs. One of the rules concerns when a company might be deemed a joint employer of another company’s employees. The other concerns when a worker can be deemed an independent contractor, rather than an employee. Each is discussed in turn below.The Joint Employer RuleIn January 2020, the DOL under President Trump issued a joint employer rule. It took effect March 16, 2020. But as we wrote about here, a number of states’ attorneys general filed suit to peremptorily challenge the rule, and the U.S. District Court for the Southern District of New York largely invalidated the rule on September 8, 2020. The District Court’s decision is currently on appeal before the Second Circuit Court of Appeals, with the DOL having already announced in its briefing in early January 2021 before the Second Circuit its support of the challenged rule.Despite this recently-professed support for the rule (while President Trump was still in office), today the DOL under President Biden has published a Notice of Proposed Rulemaking and Request for Comments in which it proposes rescinding the joint employer rule based on the opposing views of the District Court and the states’ attorneys general that the rule is contrary to the Fair Labor Standards Act and prior DOL guidance. How it plans to explain its about face in light of the DOL’s briefing before the District Court and the Second Circuit remains to be seen. The period for commenting on the proposal to rescind the joint employer rule will close on April 12.The Independent Contractor RuleOn January 6, 2021, Trump’s DOL also issued an independent contractor rule, which was scheduled to take effect on March 8, 2021. But as we anticipated in our January 6 blog would occur, the rule did not take effect on March 8. Instead, on January 20, 2021, within hours after Biden’s inauguration, the White House Chief of Staff issued a memorandum entitled “Regulatory Freeze Pending Review” that delayed the effective date of the independent contractor rule until March 21. A few weeks later, the DOL issued a notice proposing further delay of the rule’s effective date to May 7, 2021 and inviting public comment about that proposal of delay.Many strenuous objections were made in comments submitted by the business community regarding the untimely nature of the proposed rule of delay and regarding the DOL’s failure to follow procedural requirements. And as the comments submitted by Seyfarth Shaw and others explained, the independent contractor rule provided straightforward, balanced guidance to independent workers and businesses to distinguish between employees and independent contractors under the economic realities legal standard that has governed such relationships for over 70 years.Over such objections, on March 4, 2021, Biden’s DOL published as a final rule its decision to delay the effective date of the independent contractor rule until May 7. Today, it has taken the next step by publishing a Notice of Proposed Rulemaking and Request for Comments in which it proposes withdrawing the independent contractor rule, which it describes in an announcement as purportedly creating “a new” economic reality test that it claims is not supported by prior court decisions.The period for commenting on the proposal to withdraw the independent contractor rule also will close on April 12. It is possible, however, that litigation may ensue regarding the propriety of delaying the rule’s effective date and of seeking to withdraw it.What Does This Mean For Companies?While we await the issuance of final rules by the DOL and the resolution of any litigation challenging the DOL’s actions, the best that companies can do is (1) continue to look to federal court decisions in applicable jurisdictions (and, yes, decisions do vary by jurisdiction concerning the relevant factors for independent contractor and joint employer status), and (2) consider applicable state laws that might be different. Prepare also for the future possibility that the Biden Administration will, through legislation, rulemaking, or non-binding guidance, seek to substantially narrow the situations in which a company would not be deemed a joint employer and the situations in which a worker could be classified as an independent contractor.If you would like to discuss any of these development further, please feel free to contact the author or your typical Seyfarth contact.The Biden Administration: Enforcement Actions Affecting Labor EmploymentTuesday, March 23, 2021 – 2:00-3:00 p.m. ESTThe Biden Administration has gotten off to a busy start with a wide array of executive actions and policy directives. In this webinar, Seyfarth subject matter experts will discuss what employers can expect regarding the enforcement in the areas covered by these directives and how that will effect business moving forward.Register today!By Seyfarth Shaw LLP on February 25, 2021Posted in ArbitrationBy: Robert S. Whitman and John P. PhillipsSeyfarth Synopsis:  Arbitration agreements with class and collective action waivers can help employers limit litigation exposure, especially to wage and hour claims.  In recent years, however, in light of the “Me Too” movement, state and federal lawmakers have sought to limit or prohibit employment arbitration.  Unlike in past years, the make-up of the new Congress, plus a more receptive Presidential administration, means efforts at the federal level have a greater chance of enactment than ever before.  This blog series will follow these developments as they occur.Over the last several years, arbitration agreements in the employment context have faced increasing scrutiny.  During the last Congress (the 116th), over 100 arbitration-related bills were introduced.  The new Congress is off to a similar start.Unlike in the recent past, the current bills have a legitimate chance of passage and are more likely to be signed into law.  Many of the bills introduced already (and those expected to be introduced) will garner overwhelming Democratic support and some Republican support; and if passed by Congress, we can expect President Biden to sign them into law.  Thus, whether any of these bills will become law likely hinges on their support in the Senate, and whether the Senate filibuster remains intact.BackgroundMany employers have implemented mandatory arbitration agreements with class and collective action waivers as a means of reducing employment litigation-related risk, especially from wage and hour lawsuits.  As a condition of employment, employees and the employer agree to bring any claims they might have against each other in arbitration rather than in court, and they waive the right to bring class or collective claims.  The Supreme Court has consistently upheld the use of arbitration agreements in employment, and explicitly upheld employment-related class and collective waivers in the recent decision in Epic Systems Corp. v. Lewis.The plaintiffs’ bar has opposed arbitration agreements in the employment context for many years. That opposition strengthened with the widespread rollout of class and collective waivers, and was raised to another level with the advent of the “Me Too” movement.  Their efforts to restrict employment arbitration have borne fruit at the state level. However, those statutes are likely preempted by the Federal Arbitration Act (“FAA”), which generally favors arbitration agreements and preempts state laws that would limit arbitration.  Here are three examples:California. Under Assembly Bill (AB) 51, enacted in 2019, employers are prohibited from requiring employees to arbitrate claims arising under the California Fair Employment and Housing Act and related employment statutes.  A coalition of business organizations filed suit in federal court, which granted their request for an injunction on the grounds that AB 51 is preempted by the FAA.  The case is currently on appeal to the Ninth Circuit.New Jersey. New Jersey amended its anti-discrimination statute in 2019 to void “any provision in any employment contract that waives any substantive or procedural right or remedy relating to a claim of discrimination, retaliation, or harassment,” as against public policy.  The U.S. Chamber of Commerce and a New Jersey pro-business organization filed suit on the grounds that the statute is preempted by the FAA.  The case is pending.New York. In 2018, New York prohibited employers from requiring employees to arbitrate sexual harassment claims.  The state amended the law in 2019 to prohibit mandatory arbitration agreements for all discrimination claims.  The statute is being challenged on preemption grounds in several lawsuits.  Most recently, a federal district court held in February 2021 that the statute is preempted.Congressional Bills Under ConsiderationUnlike state laws, the FAA does not preempt other federal statutes. Thus, an enactment at the federal level to restrict employment arbitration—by an amendment to the FAA or through another statute—would not face the same procedural hurdles as laws like those in California, New Jersey, and New York.Two of the more comprehensive and high-profile bills to be considered this year are the FAIR Act and the PRO Act.Forced Arbitration Injustice Repeal (FAIR Act) (H.R. 963). On February 11, 2021, Representative Hank Johnson (D-GA) reintroduced the FAIR Act.  The bill had previously passed the 116th Congress on September 20, 2019 by 225 to 186, and included the support of a number of Republicans.  The current bill has 155 cosponsors in the House.  If passed, the FAIR Act would preclude mandatory arbitration agreements for disputes involving consumer, investor, civil rights, employment, and antitrust matters; it would also prohibit all class and collective action waivers.  Moreover, it would ban delegation clauses in arbitration agreements, under which arbitrability questions are decided by the arbitrator rather than the court.Protecting the Right to Organize Act (PRO Act) (H.R. 842). The PRO Act was reintroduced in the new Congress on February 4, 2021.  The PRO Act has strong support from Democrats and the Biden administration, and it would completely upend current labor relations law.  Among its many pro-union and pro-employee provisions, the PRO Act would overturn the Supreme Court’s decision in Epic Systems and would make it an unfair labor practice for any employer to use class action waivers (not just unionized employers).The PRO Act is expected to be opposed by virtually all Republicans; accordingly, its passage hinges on certain Democratic senators and whether the Senate retains the filibuster.  In contrast, the FAIR Act is likely to receive some bipartisan support.  Not only did the prior version of the FAIR Act receive some bipartisan support in the House, but some Republican senators may also support the bill—or at least a watered down version of it.  For example, Senator Lindsay Graham (R-SC) has supported limiting mandatory arbitration agreements under the right circumstances. As drafted, the FAIR Act is unlikely to garner sufficient votes in the Senate to overcome a filibuster, but a compromise bill might.TakeawaysAlthough state efforts to outlaw arbitration agreements and class and collective action waivers will likely fail under federal law, the efforts will continue—with the attendant legal risks for employers who implement arbitration agreements in those states.  Moreover, the ongoing state and federal activity demonstrates a concerted effort to limit the use of arbitration agreements and class waivers in the employment context.  Unlike in recent years, the composition of Congress is more conducive to sweeping change.  And the prospects for passage will increase if the Democrats negotiate with Republicans, a number of whom are likely to support a middle ground-type bill, such as one limited to certain types of employment-based claims or that bans class and collective action waivers but not arbitration generally.  As such, employers with arbitration programs, and those contemplating implementing such programs, should continue to monitor events in Washington and state houses.  We will also provide updates as events unfold this year.Seyfarth Shaw’s Wage Hour Litigation Blog is a resource for employers to stay current on developments in wage and hour law, including recent court decisions, legislative updates, and Department of Labor compliance, rule-making and enforcement activities.

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