Pena v. 220 East 197 Realty LLC

Background

Nelson Pena sued 220 East 197 Realty LLC and 63 West L.L.C., alleging violations of the Fair Labor Standards Act (FLSA) and the New York Labor Law (NYLL). The complaint alleged that Pena worked for the defendants as a handyman/laborer from 2014 through April 2020, usually working about 43 to 52 hours per week. He alleged that the defendants automatically deducted 30 minutes per day for meal breaks even though he did not receive genuine meal breaks, and that he was not paid for approximately 2.5 to 3 hours per week. He also alleged that he was not paid for his final two weeks of work, totaling approximately 86 to 100 hours.

The defendants moved to compel arbitration and to dismiss the complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). They identified three arbitration provisions: one in a 2013 agreement between Pena and 220 East, one in a 2020 agreement between Pena and 63 West, and one in a 2019 collective bargaining agreement between 63 West and Amalgamated Local 1931, the union representing 63 West employees. The parties agreed that the collective bargaining agreement controlled over the individual agreements, so the court focused on that agreement.

Arbitration Agreement

The court held that Section 5 of the collective bargaining agreement clearly required arbitration of claims under the FLSA, the New York State Wage Payment Law, and the New York State Wage and Hour Law. The agreement described its grievance and arbitration process as the employee’s “sole and exclusive remedy” for those claims. The court concluded that the language clearly and unmistakably covered Pena’s FLSA and NYLL claims.

Pena argued that he was unaware that he was covered by a union agreement, was not necessarily a union member, and had never received or been informed about the agreement. The court rejected those arguments. It reasoned that the union was recognized as the exclusive bargaining agent for the relevant employees and could negotiate employment terms on their behalf, including for an employee who was not a union member. The court also concluded that federal labor law did not require individual employees to ratify or receive notice of the employer-union agreement.

The court further held that 220 East could enforce the arbitration provision even though it was not a signatory to the collective bargaining agreement. The court relied on the parties’ joint-employer relationship and the fact that Pena brought the same claims against both companies, making the dispute closely connected to the agreement.

Pena’s Other Arguments

Pena argued that arbitration could not be compelled because the agreement required mediation before arbitration. The court rejected that argument, explaining that the required mediation step did not prevent arbitration after mediation concluded.

Pena also argued that arbitration was unlawful because he might have to pay arbitration costs and legal fees. The court noted that the agreement ordinarily required the union and employer to share arbitrator and mediation fees. It further provided that Pena would pay nothing if the union declined to process his claims and he prevailed in arbitration. The court concluded that Pena had not shown a likelihood of incurring prohibitive costs, so the possible expense was too speculative to invalidate the agreement.

Ruling and Disposition

The court concluded that Pena’s federal statutory claims were legally eligible for arbitration and that the agreement expressly covered them. Because all of Pena’s claims were arbitrable, the court did not need to decide whether only part of the case should be stayed.

The defendants requested either dismissal or a stay. The court held that dismissal was not appropriate when all claims were subject to arbitration and a stay had been requested. It therefore granted the defendants’ request to compel arbitration and stay the case. The court’s conclusion states that the defendants’ motion was granted in part to that extent. The case was stayed pending arbitration, and the clerk was directed to mark it as stayed. Judge J. Paul Oetken signed the order.