Appellate Court Nixes Employee Arbitration Agreements – What Does This Mean for Home Care Employers?

Notice: By decision dated July 19, 2017 (the “Decision”), the Appellate Division, First Department (the “First Department”) (which has jurisdiction over Manhattan and Bronx) held that arbitration agreements obligating employees to waive their rights to bring collective disputes, such as class actions regarding wage disputes, were unlawful and unenforceable because they “run afoul of the National Labor Relations Act” (the “NLRA”). Though freely acknowledging that the United States Supreme Court will resolve a similar issue in its October 2017 Term, the Decision currently binds the trial courts in Manhattan and the Bronx and has precedential effect for other trial courts throughout New York. The Decision can be appealed to New York’s highest court, the New York Court of Appeals.

How Did this Issue Come Up?

In Gold v. New York Life Insurance, former insurance agents engaged as independent contractors by New York Life Insurance Company (“NY Life”) asserted violation of New York Labor Law and sought recovery of underpayment of wages. Each agent’s contract contained a provision requiring arbitration of claims or disputes with NY Life. By these agreements, the insurance agents also waived any right to bring their claims on a class, collective or representative basis. On appeal from summary judgment in favor of NY Life, the First Department interjected itself into the national debate concerning enforceability of class and collective action waivers in the context of wage and hour litigation by refusing to enforce NY Life’s arbitration agreements.  The court held that these agreements were unenforceable because their class and collective action waivers violate the NLRA. The Decision is significant in that the First Department rejected the current and longstanding position held by the Second Circuit of the U.S. Court of Appeals (the “Second Circuit”) (which court’s jurisdiction includes Manhattan and Bronx) that upholds class and collective action waivers, and sided with the United States Court of Appeals for the Seventh Circuit in deeming such agreements to have an effect of unlawfully abrogating employees’ right under Section 7 of the NLRA.

What Does the Decision Mean for Home Care Employers?

Until the United States Supreme Court rules otherwise in its upcoming term, the Decision is troubling for New York employers who have relied on the United States Supreme Court’s and Second Circuit’s decisions upholding employee waivers to commence and/or participate in collective, class or representative actions. Following so soon after the First Department’s decision in Tokhtaman v. Human Care LLC, ruling that 24- hour workers are entitled to 24 hours of pay, the risk of class action 24-hour cases has increased as has the risk that Wage Parity Act claims will be added.

Plaintiffs’ attorneys seeking to assert wage claims that arose in Manhattan and Bronx will likely elect to avoid the U.S. District Court for the Southern District of New York and not pursue claims under the Fair Labor Standards Act, and assert only wage claims under New York Labor Law in state court.

Since arbitration agreements with class action waivers may no longer offer employers protection from class actions in state trial courts, we encourage home care agencies to review and evaluate their current wage and hour practices, implement regular self-audits, especially of their 24-hour cases, and undertake immediate corrective action in the event non-compliance is identified.

 FordHarrison LLP advises and counsels home care agencies and Fiscal Intermediaries under the New York State CDPAP on all issues relating to labor, employment and benefits. If you have any questions regarding this Legal Alert or would like our advice about particular facts and circumstances at your workplace, please contact the authors, Stephen Zweig at szweig@fordharrison.com, and Philip Davidoff at pdavidoff@fordharrison.com,  or contact any of the firm’s attorneys in its New York City office at (212) 453-5900.

Compensating Aides for 24-Hour Cases: The Latest

On August 15, 2017, the Appellate Division, First Department, which had earlier held that 24-hour “sleep-in” aides must be paid for all 24 hours, denied a motion to reargue or further appeal its decision to the New York Court of Appeals, New York’s highest court. Though significant, it is unlikely that this will be the last word on this issue.

Recent History. For several years, federal and state courts in New York have grappled with the issue of compensating home health aides for 24-hour “live-in” or “sleep-in” shifts under New York Labor Law.

Beginning in 2012 with Severin v. Project OHR, and continuing as recently as May 2017 with the Bonn-Wittingham v. Project OHR case, United States District Courts in New York have said that 24-hour shift workers who are afforded eight hours of sleep time (at least five hours of which are uninterrupted) and three hours for meals may be paid for 13 work hours. The New York Department of Labor has long maintained that this approach is consistent with the New York Labor Law.

In contrast, beginning in 2014 with Andryeyeva v. New York Health Care, Inc., and as recently as 2017 with Tokhtaman v. Human Care, LLC, state courts have rejected the NYDOL’s opinion and the deference provided to that opinion by the federal courts, holding that aides working 24-hour shifts must be paid for 24 hours. One notable exception in New York State courts is Moreno v. Future Care Health Servs., Inc., in which the Kings County Supreme Court found similarly to the federal courts.

As these cases have made their way through the courts, the split between the federal and state courts has deepened. So where do the cases presently stand?

NYS Courts. In April 2017, in the first appellate-level decision to address the issue, the Appellate Division, First Department, covering Manhattan and the Bronx, upheld a lower court’s decision in Tokhtaman v. Human Care, LLC, requiring aides to be paid for 24 hours. On August 15, 2017, the Appellate Division, First Department denied the agency’s motion to reargue and also refused to permit it to appeal to the New York Court of Appeals.

Tokhtaman was decided was decided by the Appellate Division, First Department less than one year after its initial filing in the lower court. Contrast this with the Andryeyeva case. The complaint in Andryeyeva was filed nearly seven years ago. The supreme court’s decision concluding that sleep-in aides were entitled to 24 hours’ pay for 24-hour shifts was issued in September 2014 and was promptly appealed. The appeal has since then been pending before the Appellate Division, Second Department, covering Kings, Queens, Richmond, Westchester, Nassau and Suffolk counties. Oral argument in the Andryeyeva appeal and the Moreno appeal was held in tandem in January 2017. To date, no decisions have been reached.

Federal Courts. While the Andryeveva appeal has been pending in state court, another federal court has waded into the controversy. In December 2016, the United States District Court for the Eastern District of New York in Bonn-Wittingham v. Project OHR agreed with the analysis of the Severin court and deferred to the NYDOL’s opinion regarding payment of 13 hours to 24-hour shift aides. In May 2017, Plaintiffs brought to the Court’s attention the Appellate Division, First Department’s decision in Tokhtaman, arguing that it represented a change in the controlling law on the issue and that the Court’s earlier decision applying the NYDOL’s 13–hour Rule should be revisited.

The Court promptly, and quite pointedly, rejected Plaintiffs’ position. The Court noted that the Appellate Division, First Department is a “state intermediate court” whose decisions are not “controlling.” Furthermore, the Court said that the New York Court of Appeals “is not likely to follow Tokhtaman” because the NYDOL’s interpretation of NYLL is “entitled to deference” by the Courts, particularly where, as here, the NYDOL’s interpretation does not conflict with the law and is otherwise reasonable. Notably, the Court cited the Moreno decision in support of its rejection of Tokhtaman.

Conclusion. The Appellate Division. First Department’s Tokhtaman decisions have decided for now the issue of pay for 24-hour shift home care workers who work within its jurisdiction (i.e., Manhattan and the Bronx). By refusing to allow an appeal of its decision to the New York Court of Appeals, the Appellate Division, First Department has heightened concern and interest in the pending Andryeyeva appeal in the Appellate Division, Second Department. If the Appellate Division, Second Department holds differently in Andryeyeva, aligning with the federal courts, it would have a significant impact and almost certainly set the stage for the issue to be decided by the New York State Court of Appeals.