Class Claim on Overtime Pay Is Barred By Retailer's Arbitration Pact, Court Rules

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June 24 — A former Bloomingdale's sales associate in California can't pursue a state law class action for alleged unpaid overtime because she signed an enforceable arbitration agreement with a class action waiver, the U.S. Court of Appeals for the Ninth Circuit ruled June 23 .  

The former employee argued the Norris-La Guardia Act and the National Labor Relations Act make the class action waiver unenforceable, as those laws protect employees' rights to engage in concerted activity.

But the Ninth Circuit said regardless of the protections offered by the federal labor statutes, Fatemeh Johnmohammadi can't show that Bloomingdale's “interfered with, restrained, or coerced her” choice on waiving her class action rights.

30-Day Opt Out Is Key

Bloomingdale's gave employees a 30-day period to opt out of the arbitration pact with no effect on job status, and Johnmohammadi knew about but failed to exercise that option, the court said.

“Bloomingdale's merely offered her a choice: resolve future employment-related disputes in court, in which case she would be free to pursue her claims on a collective basis; or resolve such disputes through arbitration, in which case she would be limited to pursuing her claims on an individual basis,” Judge Paul J. Watford wrote.

“In the absence of any coercion influencing the decision, we fail to see how asking employees to choose between those two options can be viewed as interfering with or restraining their right to do anything,” the court said.

A National Labor Relations Board administrative law judge last year rejected an unfair labor practice charge against Bloomingdale's in Johnmohammadi's case.

No Violation of NLRA

The NLRB decision in D.R. Horton Inc., 357 N.L.R.B. No. 184, 192 LRRM 1137 (2012), is distinguishable because Bloomingdale's didn't require Johnmohammadi to waive class actions as a condition of employment, the court said.

Johnmohammadi argued Bloomingdale's actions are analogous to employer misconduct that violates NLRA Section 8(a)(1). For example, the NLRB has ruled an employer violates the act by offering pay raises in exchange for employees' agreement to refrain from protected activity.

Bloomingdale's violated Section 8(a)(1) by offering employees the “benefit” of resolving all disputes through arbitration in exchange for their surrender of class action rights, Johnmohammadi said.

But she can't show Bloomingdale's offer of arbitration was “conduct immediately favorable to employees” or that Bloomingdale's made the offer with an “express purpose” of restraining employees' “freedom of choice” whether to waive or retain class action rights, the court said.

Arbitration offers uncertain benefits to employees, particularly at the outset of an employment relationship when the benefits and costs of prospectively agreeing to arbitrate can't be known, the court said.

“We don't think the offer of those benefits is of such a character that it would tend to interfere with an employee's freedom of choice,” the court said. “Johnmohammadi has offered no evidence that Bloomingdale's offered those benefits with the express purpose of curtailing its employees' freedom of choice.”

Bloomingdale's merely offered the employee “a choice: resolve future employment-related disputes in court, in which case she would be free to pursue her claims on a collective basis; or resolve such disputes through arbitration, in which case she would be limited to pursuing her claims on an individual basis,” Judge Watford wrote.

“Johnmohammadi had the right to opt out of the arbitration agreement, and had she done so she would be free to pursue this class action in court,” the court said. “Having freely elected to arbitrate employment-related disputes on an individual basis, without interference from Bloomingdale's, she cannot claim that enforcement of the agreement violates either the Norris-LaGuardia Act or the NLRA.”

Judges John T. Noonan and William E. Smith joined in the decision.

Dennis F. Moss in Sherman Oaks, Calif., Sahag Majarian II in Tarzana, Calif., and Ira Spiro of Spiro Moore LLP in Los Angeles represented Johnmohammadi. In-house counsel for Macy's Inc. and Julia H. Azarel and John S. Curtis of the Law Offices of Julia Azarel in North Hollywood, Calif., represented Bloomingdale's.

Text of the opinion is available at http://www.bloomberglaw.com/public/document/Fatemeh_Johnmohammadi_v_Bloomingdales_Inc_Docket_No_1255578_9th_C.