The Third Circuit Court recently revived a class action and putative collection case alleging that a renowned adult nightclub in New Jersey underpaid its exotic dancers. The Court issued a precedential ruling while specifying that statutory claims fall outside of arbitration agreements unless specifically mentioned in the clauses.
The Third Circuit Courts’ three-judge panel decision was a welcome victory for Ms. Alissa Moon, who previously argued to the New Jersey District Court that her ‘Independent Dancer Rental Agreement’ voided the arbitration provision within and that New Jersey Wage Payment Law, Wage and Hour claims and the federal Fair Labor Standards Act (FLSA) fall outside of its scope.
U.S. District Judge Susan D.Wigenton dismissed the case in July 2016 finding that Ms.Moon is required to arbitrate her claims due to waiving her rights under the nightclubs arbitration agreement.
The Third Circuit Court reversed the ruling on Thursday while analysing three separate Supreme Court rulings that addressed arbitration clauses within the state. The panel trio found solid guidance from Atales and Garfinkel findings, which specified the quoted language within the arbitration clause were only applicable to contract claims.
The panel stated: “As the arbitration clause presented closely resembles in nature the arbitration clause within Garfinkle and Atales claims which were found and upheld by the Supreme Court of New Jersey only were applicable to contract disputes, therefore we hold that the current arbitration clause provided fails to cover Ms. Moons’ statutory claims”
Ms. Moon’s lawsuit made allegations that the nightclub business had deliberately misclassified her as well as other exotic dancers as independent contractors which violated federal Fair Labor Standards Act and New Jersey’s Wage Payment Law and Wage and Hour Laws. Claims were lodged stating that the company failed to pay both minimum and overtime wages, as well as workers compensation premiums and mandatory insurance benefits, unemployment disability and social security taxes.
The court records show that Moon performed as an exotic dancer at Breathless Men’s Club in Rahway, New Jersey from May 2013 to September 2015 and had signed the contract agreement in January 2015.
Moon signed the contract specifying within the agreement that she was an independent contractor and not an actual employee of the Breathless company. The arbitration provision states that Moon and the company’s litigation rights were voluntarily waived and that each party had entitlements to request to resolve conflicts and disputes by binding arbitration procedures.
When Moon challenged the validity of the agreement provisions within the contract, Moon argued that the contract agreement is invalid as the contract incorrectly misclassified her as an independent contractor. Previously, Judge Wigenton had stated “that the challenges to an agreement’s legality that contains arbitration provisions in comparison to challenges to the actual arbitration process are essentially decided by the arbitrator”.
Moon then claimed that the provisions within the agreement failed to be supported with consideration, as Moon had only provided services to the club on a part-time basis for eight months after signing the contract, however the Judge found consideration was sufficient due to Moons continued ability to perform. Moon asserted that the one-sided terms that were designed to only benefit the Breathless company, including terms included within the arbitration procedure, was overall “substantively unconscionable.”
Overall, the Circuit’s finding is of note, as the issue of waiving FLSA rights for arbitration has been a hot topic with the proliferation of wage and hour lawsuits. The Court was troubled with the waiving of statutory rights not specifically enumerated in the contract, the Circuit gave deference to the New Jersey Supreme Court who indicated that an agreement like this could only wave contractual, not statutory rights.