Court affirms US Department of Labor’s independent authority to recover unpaid wages, damages in court for employees who signed private arbitration agreements

NEW YORK – A federal judge in New York has ruled private arbitration agreements do not bind the Secretary when the U.S. Secretary of Labor is not a party. The decision now allows the U.S. Department of Labor to move forward with its lawsuit alleging that three defendants misclassified their employees as independent contractors to evade the overtime and recordkeeping requirements of the Fair Labor Standards Act.

The department filed suit in the Eastern District of New York in January 2021 against Brooklyn-based CE Security LLC, Concord Limousine 1 LLC and Alexander Gavrilov seeking to recover back wages and liquidated damages for 292 of the defendants’ employees, as well as enjoin the defendants’ violations of the Fair Labor Standards Act. The suit followed an investigation by the department’s Wage and Hour Division.

In its complaint, the department alleges that collectively, the defendants provide employees known as spotholders to Consolidated Edison Company of New York Inc. to hold open parking spots for ConEd to perform its work. The spotholders drive to ConEd worksites and place cones at the utility’s worksites.

On Feb. 17, 2021, the defendants moved to compel arbitration of the Secretary’s claims under the Federal Arbitration Act and to stay proceedings pending the arbitration. The defendants argued that the act requires the Secretary to arbitrate the overtime and recordkeeping claims because the employees – whom the defendants claim to be independent contractors – had signed agreements to arbitrate employment matters with the defendants.

The decision by U.S. District Judge Ann M. Donnelly rejects the defendants’ theory that the Secretary merely “acts on behalf” of defendants’ employees in FLSA matters brought by the Secretary, noting the Secretary’s independent interests in prosecuting cases.

“This is a significant and favorable decision regarding the U.S. Department of Labor’s ability to pursue legal actions and relief for employees in the name of the public interest,” said Regional Solicitor of Labor Jeffrey Rogoff in New York. “The Office of the Solicitor of Labor prioritizes its pursuit of cases where employees do not have other avenues of relief when they are forced to arbitrate claims against their employers out of court. This decision affirms the Secretary of Labor’s independent authority to bring claims as the Secretary deems appropriate, even where employees may not because of forced arbitration agreements.”

The Wage and Hour Division’s New York City District Office conducted the original investigation. Trial Attorney David Rutenberg of the Regional Office of the Solicitor in New York is litigating the case for the department.

Workers can call the Wage and Hour Division confidentially with questions – regardless of their immigration status – and the department can speak with callers in more than 200 languages.

For more information about the FLSA and other laws enforced by the division, contact the agency’s toll-free helpline at 866-4US-WAGE (487-9243). Learn more about the Wage and Hour Division, including a search tool to use if you think you may be owed back wages collected by the division.

Secretary of Labor v. CE Security LLC, Concord Limousine 1 LLC, and Alexander Gavrilov.

Civil Action Number:  21-CV-00057 (AMD) (RLM)