Cooperate or Pay: Recovering Attorneys’ Fees to Get to ArbitrationDoes your arbitration agreement allow you to recover attorneys’ fees if the employee rebels against arbitration and you have to compel it? Maybe it should. In Aralar v. Scott McRea Automotive Group, a court in Florida recently affirmed an arbitrator’s award of nearly $20,000 in attorney’s fees for the defendant’s hassle of moving for arbitration. Employers with arbitration agreements should be encouraged that the fees incurred for moving for arbitration (when it should be clear cut) may be recoverable with the contract clause.

The Facts and the Arbitration Clause

Aralar worked in the McRea auto service center and filed a lawsuit in court under the FLSA for unpaid overtime and back wages. Pursuant to an arbitration agreement Aralar signed as a condition of employment, McRea notified Aralar’s counsel multiple times that he could not pursue the matter in court — it had to go to arbitration.

The arbitration clause provided that if one of the parties filed an action in court that was subject to arbitration, the other party would provide notice of the arbitration requirement and request to have the case dismissed. If the party who filed the court action did not dismiss the case within 10 days and the case ultimately ended up in arbitration following a motion, the moving party could recover reasonable attorneys’ fees incurred “because of the filing of the complaint.”

Aralar did not respond, and McRae filed a motion to dismiss the case and compel arbitration. Yet again Aralar failed to respond, although he eventually agreed to the arbitration forum about six weeks after it was filed. The court then compelled the matter to arbitration and stayed the case pending the results. Aralar did not end up filing his request for arbitration for another six months after the court’s ruling.

About a year later, the arbitrator granted McRae’s motion for judgment on the pleadings, finding that Aralar’s job as a service advisor was exempt from FLSA requirements. A few months later, the arbitrator awarded McRae the fees and costs incurred up through the time the case was stayed by the court, a sum totaling $19,291.58. The fees and costs awarded were about half of the amount requested.

After no further response was received from Aralar, McRae filed a motion with the court to confirm the arbitration award. Aralar finally woke up and filed to vacate the attorneys’ fee award.

The Court’s Decision

In his ruling, the judge conveyed that any party seeking to vacate an arbitrator’s findings must clear a high hurdle because federal courts defer to an arbitrator’s decisions whenever possible. Then the judge said the same standard applies for award of attorneys’ fees. Aralar contended that (1) fees should only be awarded as a sanction, and (2) that because his FLSA claim was not frivolous, the awarding of fees was inappropriate based on rulings in civil rights cases. The judge rejected those contentions and found that because the parties contractually agreed to the arbitration agreement’s fee shifting provision and Aralar did not withdraw his lawsuit within 10 days of notice, McRae was entitled to enforce the contract terms and recover the fees incurred to get the matter into arbitration.

Takeaways

The decision makes sense and these fee shifting clauses could be a useful tool to avoid fights about arbitration. Where the employer has to have its attorneys compel a matter into arbitration when the employee should have agreed to it, that unnecessary expense should come out of the plaintiff’s pocket. Employers should find some small encouragement that fee recovery provisions will be enforced. At the very least, the Aralar decision provides leverage towards peaceful agreements into arbitration rather than a fight. No plaintiff wants to pay a former employer—especially when they filed a lawsuit to try and get money.

The Supreme Court Says Yes to Arbitration and Class Action Waivers

With its 5-4 ruling in Epic Systems Corp. v. Lewis, the Supreme Court delivered a seemingly big win for employers. The Supreme Court held that employees’ waiver of their rights to bring collective or class actions, as a term of an arbitration agreement, is valid and enforceable. This ruling rejected the NLRB’s position that such waivers are invalid given the NLRA’s grant to employees of “the right . . . to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for . . . mutual aid and protection.” A blog post on Declassified provided a legal analysis of the Epic Systems opinion from a class action—as opposed to employment—standpoint. The Supreme Court has now definitively resolved that employers can use arbitration agreements to prevent employees from bringing a collective action.

But Corporate America Is Conflicted

Does This Arbitration Agreement Make Me Look Sexist? <i>The Moving Target of Using Arbitration Clauses</i>Ironically, at the very moment the Supreme Court has made it easier for employers to double down on arbitration agreements, some businesses are making headlines by curtailing arbitration terms for certain claims. It’s safe to say that the #MeToo movement has something to do with it.

Last week, after months of scrutiny and negative publicity, Uber announced that it would “no longer require mandatory arbitration for individual claims of sexual assault or sexual harassment by Uber riders, drivers or employees.” As NPR reported, Uber’s new policy does not apply to claims brought as class actions.

Uber wasn’t the first to take this step. In December 2017, Microsoft publically endorsed legislation that would protect sexual harassment victims’ ability to bring a case in court instead of in arbitration where they could be prohibited from speaking of the incident. In the same statement, Microsoft announced its own new policy and waived its contractual requirements for arbitration of sexual harassment claims.

Even some law firms have had to adapt their employment agreements in the wake of #MeToo. Posts of Munger Tolles & Olson’s summer employment contract, which effectively mandated arbitration for harassment claims, garnered unwanted attention on social media. In response, the firm released its own tweet statement that it would “no longer require any employees, including summer associates, to sign any mandatory arbitration agreements.”

#arbitrationwhatnow?  

While employers have weighed the costs of arbitration versus litigation for decades, the current environment requires new considerations. Are the cost savings of an arbitration agreement (including the ability to maintain confidentiality and prevention of class claims) worth the risk of a social media firestorm? Should you carve out individual harassment claims from mandatory arbitration (ala Uber) or risk class treatment, and carve out all harassment claims (ala MicroSoft)? In the throes of #MeToo, it’s important to consider these new costs and benefits. A simple test: If you wouldn’t want it to go viral on Twitter, reconsider.

Well, He Wrote Me a Letter: USCIS Provides Update on Initiatives under the “Buy American and Hire American” Executive OrderIn April 2017, three months after taking office, President Trump signed the “Buy American and Hire American” Executive Order, which confirmed that his administration would be taking a tough stance on business immigration, including the nonimmigrant work visa programs used by many American employers. The Executive Order itself did not put into action any substantive changes, but instead directed the agencies responsible for immigration—including those within the Department of Homeland Security and the Department of Labor—to propose new rules and reforms “to protect the interests of United States workers in the administration of our immigration system…”  It also singled out the H-1B visa program, calling for initiatives designed to ensure that H-1B visas are awarded to only the most-skilled and highest-paid foreign workers.

While the “Buy American and Hire American” Order signaled that big changes were coming to the business immigration landscape, it provided almost no specifics. In the 13 months since, however, the picture has become clearer as the new administration has made a number of important policy changes to comply with the order’s mandate and promised that other changes are on the horizon.

In fact, USCIS Director Lee Francis Cissna recently provided an update on the measures being taken by his agency in its effort to comply with “Buy American and Hire American.” In a letter sent to Sen. Charles Grassley, the Chairman of the Committee on the Judiciary, Director Cissna first outlined a number of important policy changes that have already been implemented by USCIS or are currently in progress. These included:

  • Publishing a policy memorandum designed to clarify the requirements relating to visa petitions filed for H-1B workers who will be employed at one or more third-party worksites. This new policy, issued in February 2018, means that employers will be required to comply with more rigorous documentation requirements and adjudication standards when petitioning for H-1B employees to work at client sites or other offsite locations.
  • Setting up a dedicated email hotline for reporting alleged fraud and abuse in the H-1B system.
  • Conducting more H-1B site visits and targeting H-1B dependent employers to verify that those employers are paying H-1B workers the statutorily-required salary.
  • Expanding USCIS’s site visit program to include L-1B “specialized knowledge” worker petitions, initially focusing on employers who use L-1B workers at offsite locations.
  • Releasing a policy memorandum instructing USCIS officers adjudicating nonimmigrant visa petitions to apply the same level of scrutiny to both initial petitions and extension requests. This memorandum, issued on October 23, 2017, rescinds USCIS’s previous policy which allowed adjudicating officers to give deference to a prior petition approval when adjudicating certain extension requests.

Director Cissna’s letter then laid out several other planned initiatives that will have a significant impact on employers who hire nonimmigrant workers.  These planned changes include:

  • Proposing a new regulation to remove H-4 visa holders (dependent spouses of H-1B workers) from the class of foreign nationals eligible for work authorization. This proposed change, which will require a public notice and comment period, would undo an Obama-era regulation that made certain H-4 visa holders eligible to work.
  • Establishing an electronic registration program for H-1B cap petitions to allow USCIS to better manage the intake and lottery process for H-1B petitions.
  • Implementing regulatory changes to revise the definition of “specialty occupation” for H-1B workers and to make other changes to the H-1B program. Although the specific proposed changes have not yet been announced, it’s a sure bet that these changes will only make it more difficult for employers to successfully sponsor H-1B workers.
  • Drafting a proposed regulation to remove the International Entrepreneur Rule, another Obama-era regulation that was designed to allow certain foreign entrepreneurs to stay in the U.S. to establish and operate start-up businesses.

As these and other developments demonstrate, it’s clear that the Trump administration plans to take a hardline on business immigration. The policy changes that have been implemented or announced thus far are already chipping away at the ability of employers to successfully sponsor foreign nationals for nonimmigrant visas, with certain H-1B employers feeling the greatest impact.

Employers should watch to see how the planned regulatory changes play out and expect that there’ll be more to come. Stay tuned!