OConner v. Agilant Solutions, Inc.

Background

The plaintiffs alleged violations of the Fair Labor Standards Act (FLSA) and New York Labor Law and sought certification of an FLSA collective action and a class action under Federal Rule of Civil Procedure 23. The court had conditionally certified an FLSA collective consisting of field technicians employed by Agilant, directly or indirectly, in New York City during the specified period.

After the plaintiffs sought conditional certification, Agilant introduced a “Statute of Limitations Agreement” and an “Arbitration Agreement.” The agreements required employees to bring covered employment disputes, including FLSA claims, to binding arbitration and limited the time for filing claims. Field technicians were asked to sign as a condition of continued employment, and the agreements did not disclose that signing could cause them to lose the right to participate in the pending litigation.

The opinion describes evidence that Agilant managers sought signatures quickly, that employees were not told they could decline to sign without losing their jobs, and that Agilant’s litigation counsel was closely involved in preparing and distributing the agreements. The court also described communications suggesting that management was concerned employees might be waiting to join the lawsuit and wanted to prevent that from happening. After a court conference about Agilant’s communications, management began stating that signing was not required for continued employment, although one employee still felt pressured and signed.

Legal standards

The court explained that district courts have authority to supervise communications with potential participants in FLSA collective actions and putative class actions. That authority includes preventing misleading, coercive, inaccurate, or unfair communications and protecting potential participants’ ability to make an informed decision about joining the case.

The court also applied contract principles concerning unconscionability. An arbitration agreement may be unenforceable when it results from high-pressure tactics, deceptive language, or a serious imbalance in bargaining power. The court stated that omitting important information about rights being forfeited can support a finding of unconscionability.

Arbitration agreement

The court held that Agilant’s communications were improper and misleading because the agreement did not disclose that signing could eliminate putative plaintiffs’ right to participate in this lawsuit. The short deadline for returning the agreements, the failure to explain that signing was not required, and the involvement of defense counsel supported the finding that the communications were coercive. The court also stated that the evidence suggested Agilant adopted the policy to prevent participation in the litigation, but it expressly declined to make a factual finding that Agilant acted in bad faith.

The court held that it could prevent enforcement of the agreements against putative plaintiffs in this case under its authority to supervise the collective-action notice process. It also held that the agreements were unenforceable against those plaintiffs as unconscionable because Agilant sought signatures without disclosing that the pending lawsuit existed and that signing could affect participation in it.

The court rejected Agilant’s reliance on the Supreme Court’s decision in Epic Systems Corp. v. Lewis, explaining that the decision did not require enforcement of an arbitration agreement obtained through fraud, duress, or unconscionable conduct. The court also rejected Agilant’s arguments that the National Labor Relations Board had exclusive authority or that the claims were preempted by the National Labor Relations Act. The court stated that the dispute concerned communications in an FLSA collective action, not an alleged violation of the National Labor Relations Act.

The court further held that the plaintiffs’ earlier stipulation withdrawing injunctive-relief claims from an amended complaint did not prevent them from seeking relief to protect potential participants in this litigation. The court likewise rejected Agilant’s standing and First Amendment arguments.

The court emphasized that its ruling was narrow. It did not decide whether the arbitration agreement was valid as to Agilant’s other employees or whether it would preclude participation in other potential collective actions. The ruling applied only to putative members of this FLSA collective action.

Protective order and disposition

The plaintiffs also sought a protective order prohibiting all future communications between Agilant and putative class and collective members. The court denied that request because it was broader than necessary. Some potential participants remained Agilant employees, making a complete ban on communication unrealistic and unnecessary. The court concluded that corrective notice and the ruling that the arbitration agreement could not be enforced against putative plaintiffs adequately addressed the identified problem.

The court therefore granted the plaintiffs’ motion in part and denied it in part. It held that the Arbitration Agreement was unenforceable against putative plaintiffs to preclude their participation in the litigation, granted corrective notice, and denied the requested broad protective order. The court directed the parties to discuss the proposed corrective notice at a telephone conference and directed the clerk to terminate the motion.