McCrae v. Oak Street Health, Inc.
- James Oetken
- 1:24-cv-01670
- U.S. District Court · Southern District of New York
- 9
In McCrae v. Oak Street Health, Judge Oetken affirmed an order compelling arbitration, finding McCrae assented and her enforceability challenge belonged initially to the arbitrator.
Tahari McCrae and the FLSA collective and class plaintiffs are required to proceed with the covered dispute in arbitration rather than continuing the court litigation for now; Oak Street Health, Inc. and Oak Street Health MSO obtained enforcement of the arbitration order. The case remains stayed pending arbitration.
What happened
In McCrae v. Oak Street Health, Inc., Tahari McCrae alleged that Oak Street Health, Inc. and Oak Street Health MSO failed to pay required overtime and discriminated against her because of her pregnancy. The companies sought to enforce an arbitration provision in her Employment Agreement, and a magistrate judge granted that request.
McCrae argued that she had not signed the Employment Agreement and that her challenge to the arbitration provision involved a lack of consideration that the court had to decide. The court found that she received the Employment Agreement and an attached agreement as one electronic document, had one place to sign, and signed it as part of completing her hiring tasks. It also concluded that her cost-related challenge concerned whether the arbitration provision could be enforced, rather than whether a contract had been formed, so the arbitrator should address it first.
Judge Oetken overruled McCrae’s objections and affirmed the order compelling arbitration. The case will remain stayed while arbitration proceeds. The court also directed the clerk to terminate another motion, which it denied as moot.
The detailed version
- McCrae v. Oak Street Health, Inc. · No. 1:24-cv-01670
- James Oetken
- Feb. 6, 2025
Background
Tahari McCrae brought claims against Oak Street Health, Inc. and Oak Street Health MSO under the Fair Labor Standards Act, New York Labor Law, the Family and Medical Leave Act, and New York State and City Human Rights Laws. She alleged that she was not paid overtime as required and was discriminated against because of her pregnancy. McCrae worked for the defendants as a Medical Assistant from February to November 2023.
When McCrae was hired, the defendants provided an Employment Agreement through their human-resources platform. They also provided a Confidentiality, Non-Competition and Non-Solicitation Agreement, attached as Exhibit A. McCrae reviewed the agreements as one eight-page electronic document through DocuSign. There was one available place for her to sign, and she could not reject individual portions. She electronically signed the document, which allowed her to complete other hiring tasks, including arranging direct deposit and completing her Form I-9. The Employment Agreement included an alternative-dispute-resolution provision requiring disputes such as this one to be resolved by arbitration in Illinois under the American Arbitration Association’s procedures.
The defendants moved to compel arbitration. Magistrate Judge Katharine Parker granted the motion in its entirety. McCrae challenged that order, arguing that she had not signed the Employment Agreement and that her argument concerning a lack of consideration had to be decided by the court rather than an arbitrator.
Standard of Review
The court treated the motion to compel arbitration as a non-dispositive matter. It therefore reviewed McCrae’s objections under the standard applicable to a magistrate judge’s order on a non-dispositive issue: the district court could modify or set aside a portion of the order that was clearly erroneous or contrary to law. The court stated that it agreed with Judge Parker’s analysis even under the more searching de novo standard, which involves an independent review of the issue.
Analysis
The court rejected McCrae’s argument that she did not agree to the Employment Agreement. It found significant that the Employment Agreement and Exhibit A were provided together as one document, that McCrae had only one place to sign, that signing was an explicit condition of employment, and that she could complete other required hiring tasks only after signing. These facts showed that she intended to sign both documents.
The court also noted that an employee may show assent to an arbitration provision by continuing employment after receiving notice of it. In addition, Exhibit A referred to the Employment Agreement. Based on these circumstances, the court agreed with Judge Parker that McCrae expressly and effectively assented to the arbitration provision.
The court separately addressed McCrae’s argument that the arbitration provision lacked consideration. The court explained that a lack of consideration supporting an arbitration provision ordinarily concerns contract formation and is for a court to decide. But McCrae’s particular argument was that the provision was illusory because the defendants might refuse to pay their share of arbitration fees, leaving her to pay those costs herself. The court characterized that argument as concerning enforceability, not contract formation.
The court reasoned that the Employment Agreement was supported by consideration because signing it allowed McCrae to begin working and receive wages and benefits. It did not decide the substance of McCrae’s unconscionability challenge—the argument that the arbitration provision was unfair or could not reasonably be enforced. Instead, it held that this enforceability challenge should be decided by the arbitrator in the first instance.
Disposition
The court overruled McCrae’s objections and affirmed Judge Parker’s order compelling arbitration. The case remains stayed pending arbitration. The clerk was directed to terminate the motion at ECF No. 34, which the court denied as moot.
Read the full 9-page opinion on CourtListener, the free public archive maintained by the Free Law Project.