Arbitration Provisions: Applicable to Independent Contractors or Not?

A group of security workers for the National Football League urged Judge Andrew L. Carter, Jr. of the Southern District of New York to deny the NFL’s motion to arbitrate the group’s claims, arguing they never agreed to arbitrate statutory employment rights with the league. In Foran, et al. v. National Football League, et al., the group of security workers sued the NFL in November 2018 for unpaid overtime wages under the Fair Labor Standards Act (FLSA), among other claims, alleging the NFL misclassified them as independent contractors. The NFL moved to compel arbitration arguing the security workers’ claims are covered by the arbitration provision in their independent contractor agreements. The plaintiffs, in opposition, contend that unless the arbitration provision specifically includes a waiver of statutory claims under the FLSA, the NFL cannot compel arbitration of the claims. The motion remains pending before Judge Carter.

The subject arbitration provision states in part: “any dispute arising out of this Agreement or the services performed by Consultant pursuant to this Agreement shall be referred to final and binding arbitration pursuant to the procedures of the American Arbitration Association.” Under New York law, an arbitration provision in the employment law context must contain a “clear and unmistakable” waiver that the parties intended to arbitrate employment rights claims. A “clear and unmistakable” waiver exists where either: (1) the arbitration provision contains an explicit provision whereby an employee specifically agrees to submit all causes of action arising out of the employee’s employment to arbitration; or (2) the arbitration provision specifically references or incorporates a statute into the agreement to arbitrate disputes.

In Foran, the arbitration provision made no reference nor incorporated any statute or waiver of statutory employment rights, and thus would likely not constitute a “clear and unmistakable” waiver under the second requirement. What remains unclear, however, is whether the court will find that the arbitration provision’s reference to “any dispute arising out of this Agreement” a “clear and unmistakable” waiver under the first requirement.

Employers might find comfort in a recent decision involving a different group of security workers – also independent contractors – who filed age discrimination and FLSA violations against the NFL. A few days before the Foran plaintiffs filed their lawsuit, Judge Lorna G. Schofield of the Southern District of New York, in Buckley et al. v. The National Football League, found that an arbitration provision, identical to the Foran plaintiffs’ independent contractor arbitration provision, encompassed the Buckley plaintiffs’ FLSA and age discrimination claims. Judge Schofield held that the Buckley plaintiffs’ relationship with the NFL is related to their independent contractor agreement, and without the agreement, a relationship – whether as an employee or an independent contractor – would not exist at all, and mandated arbitration on that basis. If Judge Carter follows Judge Schofield’s analysis, the Foran plaintiffs are likely to find themselves in the same situation as the Buckley plaintiffs – in arbitration – because Judge Carter will likely also hold that the “any dispute” language of the arbitration provision includes federal wage and hour claims. If, however, Judge Carter concludes that the “any dispute” language is overbroad and the Foran plaintiffs did not specifically agree to submit all causes of action arising out of their (alleged) employment to arbitration, the NFL may find itself in federal court litigating the FLSA claims.

The key takeaway is that companies and organizations should be proactive and discuss with employment counsel how best to structure independent contractor agreements and determine whether to include the broad “any dispute” language in arbitration provisions.