Judge OKs Wage Suit While Calling Arbitration Act A 'Weapon'

A Massachusetts federal judge claimed that the Federal Arbitration Act is a “weapon” used by corporate America to erode civil rights. The same judge ruled that a retail employee’s wage suit can’t be sent to arbitration because the employee is exempt under the law.

U.S. District Court Judge William G. Young handed down the spirited decision Monday, denying Premium Retail Services Inc.'s request to toss former employee Sara Fraga's wage and hour suit that alleges she was owed payment for the time she spent traveling and setting up retail displays.

Judge Young agreed with Fraga's argument that she is not bound by the FAA, and thus the agreement, because she engaged in interstate commerce while delivering displays to stores across multiple states — a key exemption from the act.

Judge Young said Fraga was not occasionally transporting goods across state lines for work. Contrary to Premium's arguments, it was an integral part of her job, he said.

"Fashioned by corporate America into one of its most potent weapons against its customers and its own employees, this single statute possesses the power largely to eviscerate the entire panoply of civil rights and consumer protection statutes so arduously construed by the Congress over the years," Judge Young said of the FAA.

Fraga sued Premium in May 2021 in a proposed class and collective action alleging that the company violated both the Fair Labor Standards Act and Massachusetts Minimum Fair Wage law. She said she and other employees were required to clock out when they delivered store displays and set them up at their locations, which caused them to lose wages.

Premium moved to compel arbitration, but Fraga argued that her former employer failed to show the arbitration was enforceable, that her claims are not covered by the agreement, and that she is exempt as someone who engages in interstate commerce under the FAA.

Her first two arguments are "forlorn hopes, marched out onto barren factual ground to be shot down by established precedent," Judge Young said. But her interstate commerce exemption argument has legs, he ruled.

Now that Fraga is "freed from the shackles of the FAA," Judge Young said she is also allowed to sue under Massachusetts' wage law because it does not permit contracts to take away an employee's right to legal action.

But Judge Young noted that Fraga may not be entirely in the clear to pursue her class and collective action. She must now demonstrate that she is a part of a class of employees who are also freed from the FAA under the interstate commerce exemption.

Additionally, the protections Massachusetts offers employees to pursue legal action collectively even if an arbitration agreement is present do not extend outside its borders, which may further complicate Fraga's attempt to free other employees from Premium's arbitration agreement.

"The actual battle is about to begin," Judge Young said.

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