Buffalo Wild Wings Case Tests Future of Class Action Waivers

A lawsuit accusing Buffalo Wild Wings Inc. of owing wages to thousands of workers could soften the blow for worker advocates reeling from a recent U.S. Supreme Court decision to legalize class action waivers.

The high court May 21 ruled in Epic Systems Corp. v. Lewis that companies can require workers to sign arbitration agreements waiving their rights to file a class or collective action. The decision was a major victory for employers who want to include these clauses in employment contracts as a means of limiting their exposure to costly and embarrassing litigation.

The ruling was seen as a devastating setback to workers’ rights to band together in court. Businesses now can resolve employee disputes individually in an arbitration process that can leave workers without legal representation because plaintiff attorneys often can’t afford to defend one worker at a time.

But the nearly 400 individual arbitrations that Buffalo Wild Wings is facing over wage-and-hour disputes may represent a cautionary tale for employers and a glimmer of hope for workers and their attorneys. Lawyers for workers at the restaurant chain are pursuing those cases individually because the employees signed arbitration agreements waiving their right to bring a class action against the company.

Rather than accept arbitration as an automatic loss, a select number of firms want to flood a business with mass individual arbitration filings to gain leverage for a settlement. Employers, generally responsible for footing the bill of the arbitration proceeding, can easily run up a tab of six figures or more if they encounter a plaintiff’s counsel determined to deliver arbitrations en masse.

“The requirement to go one by one by one for workers in arbitration doesn’t help employers either,” Cathy Ruckelshaus, general counsel of the National Employment Law Project, told Bloomberg Law. “It’s incredibly expensive and if they’re paying for it, at some point the employers are going to say, ‘OK, 10 workers is enough. We don’t need to talk to all 5,000 workers.’”

Executing the Threat

By siding with industry on the waivers’ legality, the justices injected fresh relevance into a 2015 class action alleging Buffalo Wild Wings failed to pay the minimum wage to tipped workers across the country. The two sides later determined that 822 of those seeking to join the action couldn’t proceed in court because they had signed arbitration agreements that include a class action waiver.

Last fall, several weeks after oral arguments in Epic Systems, a pair of plaintiffs’ firms delivered a preemptive message: If an employer wants to insist on resolving workplace claims out of court, that means arbitration 391 times.

Buffalo Wild Wings lawyers are in the early stages of negotiating a settlement with the workers. The outcome could mean millions of dollars split among the 5,500 employees who had signed on to the original complaint, including the 391 who are now split off into arbitration. More broadly, employment lawyers think a big settlement could lead other businesses to take the threat of mass arbitration more seriously.

“The defendant never believes that you’re going to actually do it, so once you do and you’ve made good strategic decisions about who you’re moving forward with, that’s a powerful thing to do,” Racchana Srey, who chairs the wage-and-hour practice group at the National Employment Lawyers Association, told Bloomberg Law. “I think it would serve as a deterrent to other employers out there who want to take the same strategy of enforcing these agreements.”

Srey is a partner at Nichols Kaster in Minneapolis, one of a handful of national plaintiff firms with the manpower to pursue multiple arbitrations on behalf of workers who waived their right to bring collective claims in court.

Lee Schreter, who co-chairs wage-hour practice at the nation’s largest management-side workplace law firm, isn’t persuaded that plaintiffs’ lawyers typically have the will to execute on this threat.

“It can be an expensive proposition” for employers, “but it can be as well for plaintiffs’ counsel, because they have to be able to staff and defend individual arbitrations,” Schreter, a shareholder at Littler Mendelson in Atlanta, told Bloomberg Law. “My experience is that they get into four or five cases and the appeal of that approach quickly loses steam.”

Can Mass Filings be Replicated?

The procedural history of the Buffalo Wild Wings case offers a blueprint for specialized scenarios, but not one that can be replicated as frequently as worker advocates would desire.

Attorneys from Outten & Golden in New York and Werman Salas in Chicago identified 391 employees to bring individual arbitrations because they earlier had represented those workers in the class action.

For now, progress on that front is shielded because arbitration proceedings are kept confidential. But the judge handling the 2015 litigation over the same initial wage violation claims agreed in June to delay a hearing to allow the parties time to negotiate a settlement. This suggests that the operational and financial headaches of 391 arbitrations may have pressured the company to settle.

Another factor possibly influencing the company’s willingness to settle is that Buffalo Wild Wings was purchased by a Roark Capital Group, the owner of Arby’s, late last year. The deal was finalized in February.

A Buffalo Wild Wings spokeswoman did not respond to a request for comment on why the company is trying to settle and what role, if any, the new ownership played in the decision. Attorneys for both the company and the workers declined to comment.

Joe Sellers, a partner at Cohen Milstein in Washington, has been strategizing how plaintiffs’ lawyers can rebound from Epic Systems. He cautioned that it’s much harder to find the volume of workers needed to engage in mass arbitration when lawyers don’t have a list of clients from a class action.

Attorneys could pick up clients by scanning informal networks that employees have among themselves or through referrals from unions or worker centers.

“It’s not to say that this could never be replicated, but I think the likelihood of this kind of scenario arising several years from now, where in the event there’s a significant increase in the number of class waivers in enforceable arbitration clauses, is going to make this kind of strategy more challenging or less likely to be available,” Sellers told Bloomberg Law.