In a recent decision, Judge Young of the U.S. District Court for the District of Massachusetts held that an arbitration agreement does not need to specifically reference the Massachusetts Payment of Wages Law in order for claims under that statute to be subject to arbitration. Specifically, the district court held that any such requirement would be preempted by the Federal Arbitration Act (FAA).
In Awuah v. Coverall N. Am., Inc., the court first considered whether Massachusetts law required that an arbitration agreement specifically mention the Massachusetts Payment of Wages Law, Mass. Gen. Laws ch. 149, § 148, to be enforceable as to claims under that statute. The court noted that, in Crocker v. Townsend Oil Co., 464 Mass. 1 (2012), the Massachusetts Supreme Judicial Court held that a waiver of claims under the Payment of Wages Law must be written in “clear and unmistakable terms” and “must specifically refer to the rights and claims under the” Payment of Wages Law. Accordingly, Judge Young concluded that the Supreme Judicial Court likely would impose a similar requirement in the context of an arbitration agreement, i.e., an agreement to arbitrate claims under the Payment of Wages Law would only be enforceable if it specifically referred to the Payment of Wages Law.
In a prior decision in the Awuah case, however, the U.S. Court of Appeals for the First Circuit suggested that any such special notice requirement would be preempted by the FAA. Apparently unaware that the Crocker decision had just been issued, the First Circuit held in Awuah v. Coverall N. Am., Inc., 703 F.3d 36 (1st Cir. 2012) that Massachusetts does “not impose any . . . special notice requirement[s]” for arbitration agreements, but went on to say that “[s]uch a requirement . . . would be preempted by the Federal Arbitration Act.”
In his December 6 decision, Judge Young noted that, although the First Circuit’s statement regarding preemption was dicta, he felt obligated to abide by it. Therefore, he held that although Massachusetts law “requires an express statement to subject [claims under the Payment of Wages Law] to arbitration,” that requirement is preempted by the Federal Arbitration Act. Notably, Judge Young observed that he personally disagreed with the First Circuit’s analysis and would have reached a different result if he were not bound by the First Circuit’s decision. He went on to say that the “plaintiffs must convince the First Circuit that the FAA does not preempt such a rule under Massachusetts law.”
This is an important issue for any employer that has entered into arbitration agreements with employees in Massachusetts, or is contemplating doing so. Although Judge Young’s decision is not binding precedent, his decision does provide employers with persuasive authority to support an argument that arbitration agreements need not specifically mention the Massachusetts Payment of Wages Law in order to be enforceable. That said, employers should take caution and not make any changes to their arbitration agreements unless and until the First Circuit or the Massachusetts Supreme Judicial Court rules on this issue.