In Dixon v. Perry & Slesnick, P.C., the Appeals Court recently reversed the trial court’s order denying the employer’s motion to dismiss and compel arbitration. This decision establishes that in certain circumstances claims arising under the Massachusetts Wage Act are subject to arbitration.
Upon commencing employment in 2004, dentist Wendy Dixon signed an employment agreement, which included the provision that “all disagreements and controversies arising with respect to this Agreement, or with respect to its application to circumstances not clearly set forth in this Agreement, shall be settled by binding arbitration.” After resigning in August 2007, Dixon filed suit against her employer, alleging violation of Massachusetts General Laws ch. 149, §§ 148 and 150 (the Wage Act). Invoking the terms of Dixon’s employment agreement, the employer moved to dismiss the lawsuit and compel arbitration. Dixon opposed the motion, asserting that her nonpayment of wages claim was not subject to arbitration because the Wage Act stipulates that an aggrieved employee has the right to institute a civil “action” and that no employer may enter a “special contract” to exempt it from this regulation. Dixon contended that the term “action” should be interpreted narrowly to mean only a lawsuit in court. Based on this reasoning, she argued that an agreement to arbitrate is effectively a waiver of an “action,” and therefore, it constitutes a prohibited “special contract” under the Wage Act.
The Appeals Court rejected this argument and held that the term “action” is not limited to a civil action in court, in part because all of the remedies available under the Wage Act, including multiple damages and attorneys’ fees, are available through arbitration. Hence, the Court ruled that each agreement to arbitrate must be analyzed individually to determine its enforceability. Having determined that Wage Act claims are arbitrable, the Appeals Court next examined whether Dixon had waived her right to a trial in favor of arbitration. Several factors led the Court to conclude that Dixon had indeed waived her right to pursue her claims in court: (1) Dixon negotiated and voluntarily executed the agreement; (2) the claims at issue arose directly from the terms of the agreement regarding her compensation; (3) the arbitration provision was broad enough to encompass claims under the Wage Act; (4) the reservation of rights provision did not exempt claims existing outside of the contract from arbitration; and (5) there is a strong public policy favoring arbitration. Moreover, contrary to Dixon’s argument, the Court ruled that arbitrating her claim would not affect the rights of non-parties to the arbitration agreement since Dixon did not bring her claim on behalf of others. This decision confirms that courts in the Commonwealth will compel arbitration of Wage Act claims in appropriate circumstances. When crafting and implementing arbitration provisions in employment agreements, employers are encouraged to take note of the factors leading to the Court’s ruling in this case.