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Employers Will Try Everything To Get Into Arbitration

by | Aug 24, 2023 | Employment Discrimination, Employment Law, Federal Law Update, Wage: Overtime |

Ah, arbitration agreements. These legal novelties often come cloaked in fine print, making them as noticeable as a chameleon in a garden. In the age-old struggle between employees and employers, the employers will do anything to prevent employees from having their day in court, including by doing everything in their power to enforce arbitration clauses. Enter the case of Lastephen Rogers against Tug Hill Operating, LLC – a case that perfectly encapsulates the ever-persistent maneuvering by employers to slide employment discrimination and overtime disputes into the arena of arbitration.

The Case of Lastephen Rogers: A Classic FLSA Tale of Classification Woes

Imagine working tirelessly for a company, believing you’re merely a contractor, only to discover you might have been more of an employee all along. This is precisely what happened to Lastephen Rogers, who spent a year and a half with Tug Hill Operating, LLC, a Texan titan in the oil and natural gas industry. Rogers claimed that despite being formally labeled as an independent contractor, he deserved the golden overtime pay typically granted to employees working over 40 hours a week. His argument was simple yet powerful: Tug Hill had more control over him than a puppeteer over marionettes.

As the story goes, Rogers commenced his legal action against Tug Hill under the Fair Labor Standards Act (“FLSA”), alleging that Tug Hill had wrongly classified him as an independent contractor when he should have been deemed an employee under the FLSA. The crux of his argument lay in the significant degree of control Tug Hill wielded over his work, effectively treating him like an employee without the associated benefits. He argued that this warranted him the overtime pay he was denied for the weeks he worked beyond the standard 40 hours. The employer would not pay, so Rogers sued.

Once in court, Tug Hill pointed to an agreement that Rogers had entered into with RigUp, Inc., a placement company that arranged for his employment at Tug Hill.

First, Tug Hill sought to use the agreement as proof that Rogers was an independent contractor because that agreement provided that Rogers was “an independent professional and entrepreneur” who wanted to “be introduced to new clients by RigUp … to provide [them] services … as an independent professional, and not as an employee.” On the other hand, the agreement also provided that after RigUp match Rogers with a company, he and that company would “solely negotiate and determine … when and where [he would] perform [p]rojects” and that “[a]ny interactions or disputes between [him] and a Company [would be] solely between [him] and that Company.”

Second, Tug Hill pointed to the fact that the agreement that required that all disputes be resolved by arbitration in front of the American Arbitration Association.

Best Overtime Wage Lawyer Blogs on Point:

Are arbitration agreements interpreted more leniently than regular contracts to promote arbitration?

If you asked employers or their attorneys, they would yell yest at the top of their lungs and point to the Federal Arbitration Act’s stated purpose to promote arbitration. Of course, they would be wrong.

In Rogers v. Tug Hill Operating, LLC, No. 22-1480, 2023 WL 5004996 (4th Cir. Aug. 7, 2023), the United States Court of Appeals for the Fourth Circuit, pointing to recent United States Supreme Court precedent, and held:

The Supreme Court has recognized explicitly and repeatedly that arbitration obligations are grounded in contract law, including by emphasizing recently that under the FAA, “arbitration agreements [are] as enforceable as other contracts, but not more so.” Morgan v. Sundance, Inc., ––– U.S. ––––, 142 S. Ct. 1708, 1713, 212 L.Ed.2d 753 (2022) (cleaned up); see id. (explaining that the Court’s prior recognition of a federal “policy favoring arbitration” was “merely an acknowledgment of the FAA’s commitment to overrule the judiciary’s longstanding refusal to enforce agreements to arbitrate” and that “the federal policy is about treating arbitration contracts like all others, not about fostering arbitration” (cleaned up)). Moreover, it is well established that when a challenge to the existence of a contractual obligation is properly raised, “the court determines whether a valid arbitration agreement exists” “before referring a dispute to an arbitrator.” Henry Schein, Inc. v. Archer & White Sales, Inc., ––– U.S. ––––, 139 S. Ct. 524, 530, 202 L.Ed.2d 480 (2019)

So, there you have it. To enforce an arbitration agreement, the employer must first prove that a contract was entered into by the parties and then show that the contract specifically covers the dispute at issue.

In Rogers, the Fourth Circuit Court of Appeals held that not only was Tug Hill not a party to the contract, but that the contract did not state a requirement to arbitrate claims with any third parties, such as Tug Hill. Specifically, the Court held that the Agreement between Rogers and RigUp contained no terms that the Agreement was entered into for the sole or direct benefit of Tug Hill. Instead, the Fourth Circuit Court of Appeals held that the Agreement provided the exact opposite: “The Agreement provides that its purpose was to govern only the legal relationship between RigUp and Rogers.” The Court pointed to language that specifically required Tug Hill to separately negotiate and determine the location and duration of work as well as Roger’s pay. Even more, the Court pointed to the Agreement’s terms that “[a]ny interactions or disputes between [Rogers] and [Tug Hill] are solely between [Rogers] and [Tug Hill].” (Alterations in the original). The Court took particular interest in the fact that the Agreement provided that RigUp “will not be a party to disputes or negotiations of disputes, between [Rogers] and [Tug Hill].” (Alterations in the original). Lastly, the arbitration clause never mentioned any parties other than Rogers and RigUp.

Based on this the United States Court of Appeals for the Fourth Circuit reversed the district court’s dismissal of the claim in favor of arbitration.

As you can see, dealing with an employer’s attempt to force arbitration brings forth a lot of complex issues, including whether a contact was actually formed and, if so, interpreting the specific terms of the contract. That is only the tip of the iceberg regarding the issues that may come into play when fighting arbitration clauses or actually having to fight the employment claims in arbitration.

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What should I do if my employer want to force my employment claims into arbitration?

So, what should you do if your employer taps the arbitration agreement on your shoulder, inviting your dispute into its dimly lit chamber? First, take a deep breath, and resist the urge to panic. Remember, you’re not alone in this legal labyrinth. That’s where Spitz, The Employee’s Law Firm, enters the scene. With their battle-tested expertise in employment law, they’re the guiding light you need.

Why choose Spitz, you ask? Well, for starters, they offer a free initial consultation, allowing you to dip your toes in the legal waters without commitment. When the weight of potential arbitration feels like a ton of bricks on your shoulders, this no-cost consultation can be a lifeline. And it doesn’t stop there. Spitz stands by their clients with a No Fee Guarantee. (Read: What is the Spitz No Fee Guarantee?) This means they only get paid when you do – a testament to their confidence in delivering justice.

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