Barbara Anderman  |  December 16, 2014

Category: Labor & Employment

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sears holdingsTwo Sears assistant store managers in California who filed an unpaid overtime class action lawsuit against Sears Holdings Management Corp. in January must arbitrate their claim instead. U.S. District Judge Anthony Battaglia ruled that the Federal Arbitration Act (FAA) takes precedence over a California state rule that bars arbitration agreements.

Jennifer L. and Rafael S. allege in their unpaid overtime lawsuit that Sears not only failed to pay overtime, but didn’t provide correct wage statements or certain owed wages in a timely manner, and that the company engaged in unfair business practices.

In addition, they filed a Private Attorney General Act (PAGA) claim. PAGA claims allow a worker to seek civil penalties on behalf of the state.

At issue is an arbitration clause signed by both employees. In April 2012, after being employed by Sears, both Jennifer and Rafael signed an agreement that “all employment-related disputes between you (‘Associate’) and Company that are not resolved informally shall be resolved by binding arbitration in accordance with the terms set forth below. This Agreement applies equally to disputes related to Associate’s employment raised by either Associate or by Company.”

As they had signed the agreement, Sears asked the plaintiffs to begin arbitration in July and stay the case. But Jennifer and Rafael chose not to, arguing that the “Agreement is unenforceable as to the representative PAGA claims pursuant to the California Supreme Court’s recent decision in Iskanian v. CLS Transp. L.A., LLC.”

Under this ruling, provisions requiring employees to waive their PAGA suits aren’t enforceable; therefore, argue Jennifer and Rafael, “because the PAGA waiver is invalid and the Agreement states that the PAGA waiver is not severable, the entire Agreement is unenforceable.”

However, in the eyes of the court, by signing the arbitration clause Jennifer and Rafael waived their ability to file their unpaid overtime lawsuit. Moreover, the Federal Arbitration Act, which governs the enforcement of arbitration agreements involving interstate commerce, says in Section 2 that an arbitration agreement “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”

As such, the judge determined that the claim they filed cannot proceed, and all of the grievances Rafael and Jennifer filed against Sears need to be settled by arbitration.

Sears representatives, content with the decision, said, “Sears is committed to resolving employee disputes in a fair and expeditious manner, and we’re pleased that two more federal judges have recently upheld our employee arbitration agreement as being fully enforceable, including as to class and private attorney general claims.”

The Sears Unpaid Overtime Class Action Lawsuit is Case No.: 14-cv-1620 AJB (WVG), in the U.S. District Court for the District of Arizona.

California Wage Laws

Under California labor laws, hourly employees (non-exempt) are entitled to overtime once they pass 40 hours in a week. This overtime wage is 1.5 times their regular rate of pay for all hours worked over eight hours a day. The state law is backed up by a U.S. federal statute, the Federal Fair Labor Standards Act.

Millions of dollars have been paid out by companies settling employee lawsuits for violations including unpaid overtime, missed meal periods, missed rest breaks, and unpaid off-the-clock work.

Join a Free Unpaid Overtime, Wage & Hour Class Action Lawsuit Investigation

If you were forced to work off the clock or without overtime pay in California within the past 2 to 3 years, you have rights – and you don’t have to take on the company alone.

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One thought on Arbitration Ordered in Sears Unpaid Overtime Class Action Lawsuit

  1. PUja says:

    how do you know what the update is on the lawsuit. It sounds like a long hauled process.

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