appeal from the order of the Supreme Court, New York County
(O. Peter Sherwood, J.), entered on or about September 4,
2015, which, to the extent appealed from as limited by the
briefs, granted defendants' motion for summary judgment
dismissing the second, third, and fourth causes of action as
to all plaintiffs except plaintiff Melek Kartal, and granted
defendants' motion to compel Kartal to arbitrate her
Stewart Halebian Jacobson, LLP, New York (John Halebian and
Adam Mayes of counsel), and Law Offices of Sanford F. Young,
P.C., New York (Sanford F. Young of counsel), for appellants.
Lewis & Bockius LLP, New York and Princeton, N.J. (Sean
P. Lynch, and Richard G. Rosenblatt of the bar of the State
of New Jersey and the Commonwealth of Pennsylvania, admitted
pro hac vice, of counsel), for respondents.
Rolando T. Acosta, J.P., David Friedman, Angela M.
Mazzarelli, Richard T. Andrias, Karla Moskowitz, JJ.
appeal, we consider an issue that we have never directly
addressed before now: whether employees can be obliged to
arbitrate collective disputes such as class actions regarding
wage disputes with their employers. We find that plaintiffs
cannot be required to arbitrate their disputes with defendant
New York Life Insurance Company because that obligation would
run afoul of the National Labor Relations Act.
in this action are former insurance agents for defendants New
York Life Insurance Company and its related companies
(collectively, NY Life), all of which provide a variety of
insurance products, including life insurance and annuities.
Plaintiffs brought this putative class action seeking
recovery for allegedly illegal wage deductions and violations
of overtime and minimum wage laws.
generally hired new agents, including the four named
plaintiffs, as Training Allowance Subsidy (TAS) agents for up
to three years. As to training the new agents, NY Life had a
"sales cycle" that it taught to its agents, which
consisted of, among other things, fact-finding or gathering
information and, after having done so, tailoring an insurance
product to a client's needs.
joining NY Life, each plaintiff signed standardized
contracts, including an "Agent's Contract" and
a "TAS Plan Agreement." Each Agent's Contract
provided that the agent was not an employee of NY Life, but
an independent contractor free to exercise his or her own
discretion and judgment in soliciting applications.
Plaintiffs Johnson's and Kartal's Agent's
Contracts further provided that they were free to work the
hours of their choosing and from their own homes or offices.
Moreover, their remuneration was not to be based on the
number of hours worked, but on commissions "directly
related to sales or other output."
maintained a ledger system to keep track of the compensation
payable to each plaintiff. Each agent's ledger tallied
credits for commissions and allowances resulting from sales,
and tallied debits for certain expenses and commission
reversals. Credits and debits were reconciled on a rolling
basis as they were posted to the ledger, and plaintiffs'
semi-monthly pay consisted of their credits net of debits as
of the date plaintiffs received their pay. Under the TAS
Agreements, when a customer paid the first monthly premium on
a policy, the agent was credited with an "advanced"
or "annualized commission." Thus, although NY Life
had received only a single month's premium payment, it
credited the agent's ledger with the commission and
training allowance corresponding to a full year's worth
of premium payments.
also offset two kinds of charges against the agent's
earnings, only one of which is relevant to this appeal: NY
Life debited agents' ledgers for commission reversals or
chargebacks. These chargebacks occurred under three
were annualized commission reversals that occurred when a
customer cancelled a policy or the policy lapsed within its
first year. The TAS Agreements provided that in those
circumstances, the annualized commission previously credited
for a full year's worth of premium payments would be
reversed and the agent would be credited only with
commissions corresponding to the premiums received.
the TAS Agreements provided for refunds of premium reversals.
Thus, when NY Life rescinded or cancelled a policy and
refunded the premium to the customer, in whole or part, NY
Life debited the agent's ledger by the commission amount
corresponding to the refund.
NY Life charged back commissions on certain products such as
annuities and universal life insurance policies if the
customer withdrew money from the product or surrendered it
within a certain time after purchasing it. Although charged
back commissions were apparently not specified in the
Agent's Contracts or TAS Agreements, NY Life's
commission manual states that commission chargebacks will
occur when a policy is surrendered or foreclosed, or lapsed
in the first 24 months after issuance.
Kartal's Agent's Contract contained an arbitration
provision requiring arbitration of any claim or dispute with
NY Life, with certain exceptions that the parties do not
address on this appeal. Additionally, under the arbitration
provision, Kartal waived any right to a jury trial and agreed
that no claim could be brought or maintained "on a class
action, collective action or representative action basis
either in court or arbitration." But the provision also
provided that if the waiver of class, collective, or
representative actions were found to be unenforceable, the
class, collective, or representative claim would proceed in
four plaintiffs in this appeal filed this consolidated and
amended class action complaint in Supreme Court, New York
County, alleging four causes of action; only the second,
third, and fourth causes of action are relevant to this
appeal . The second cause of action, asserted
by all plaintiffs, alleged unlawful wage deductions for
commission reversals in violation of Labor Law § 193.
The third cause of action, which only plaintiffs Johnson and
Kartal asserted, alleged failure to pay overtime in violation
of 12 NYCRR 142-2.2. The fourth cause of action, also which
only plaintiffs Johnson and Kartal asserted, alleged failure
to pay the minimum wage in violation of Labor Law § 652.
as relevant to this appeal, NY Life moved to dismiss the
second, third, and fourth causes of action and to compel
Kartal to arbitrate her claims. At oral argument, Supreme
Court orally granted so much of the motion as sought to
compel plaintiff Kartal to arbitrate her claims. The motion
court also converted NY Life's motion to dismiss the
second, third, and fourth causes of action as to the other
plaintiffs to a motion for summary judgment and ordered
supplementary briefing. After the additional briefing, the
motion court granted summary judgment to NY Life, dismissing
the second, third, and fourth causes of action as to all
plaintiffs except Kartal. At the same time, the court also
put in writing its granting of NY Life's motion to compel
Kartal to arbitrate her claims, and, pending resolution of
the arbitration, stayed the action as to Kartal's claims.
first to that portion of the motion court's order
addressing the arbitration provision in Kartal's
Agent's Contract . As noted above, the motion court
granted that branch of NY Life's motion seeking to compel
arbitration of Kartal's claims.
of this State have not squarely addressed the question of
whether this type of arbitration provision is enforceable.
Further, there is a recent split among the Federal Circuit
Courts regarding these types of clauses. Upon consideration
of the matter, we conclude that the better view is that
arbitration provisions such as the one in Kartal's
contract, which prohibit class, collective, or representative
claims, violate the National Labor Relations Act (NLRA) and
thus, that those provisions are unenforceable.
reaching this conclusion, we agree with the reasoning in
Lewis v Epic Sys. Corp. (823 F.3d 1147');">823 F.3d 1147');">823 F.3d 1147');">823 F.3d 1147 [7th Cir
2016], cert granted __ U.S. __, 137 S.Ct. 809');">137 S.Ct. 809');">137 S.Ct. 809');">137 S.Ct. 809');">137 S.Ct. 809');">137 S.Ct. 809');">137 S.Ct. 809');">137 S.Ct. 809');">137 S.Ct. 809');">137 S.Ct. 809');">137 S.Ct. 809');">137 S.Ct. 809');">137 S.Ct. 809');">137 S.Ct. 809');">137 S.Ct. 809');">137 S.Ct. 809
), the recent case from the United States Court of
Appeals for the Seventh Circuit, which addressed the
enforceability of arbitration agreements prohibiting
collective actions. In Lewis, the plaintiff employee
agreed to an arbitration agreement mandating that wage and
hour claims could be brought only through individual
arbitration and requiring employees to waive "the right
to participate in or receive money or any other relief from
any class, collective, or representative proceeding"
(id. at 1151) [internal quotation marks omitted].
The arbitration ...