Gold v. New York Life Insurance Co.
59 N.Y.S.3d 316
N.Y. App. Div.2017Background
- Four former insurance agents sued New York Life (NY Life) in a putative class action alleging unlawful wage deductions (commission charge‑backs) and, for two plaintiffs, unpaid overtime and minimum wage claims.
- Each agent signed standard contracts (Agent’s Contract and TAS Plan Agreement) describing them as independent contractors paid by commission; ledgers credited annualized commissions upon first premium and allowed debits for reversals/charge‑backs.
- Kartal’s Agent’s Contract contained an arbitration clause that waived jury trial and barred class, collective, or representative actions; it stated that if that waiver were unenforceable, class/collective claims would proceed in court.
- Supreme Court granted summary judgment dismissing the wage‑deduction, overtime, and minimum‑wage claims for all plaintiffs except Kartal, and ordered Kartal to arbitrate; this appeal followed.
- The appellate majority affirmed dismissal of the substantive claims but reversed the arbitration order for Kartal, holding class/collective waivers in employment arbitration agreements violate the NLRA and are unenforceable under the FAA’s saving clause.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of class/collective‑action waiver in Kartal’s arbitration clause | Waiver violates NLRA §7 because collective litigation is protected concerted activity; thus clause unenforceable | FAA requires enforcement of arbitration clauses; waiver of class/collective actions is valid and does not conflict with NLRA | Court: Waiver violates NLRA and is unenforceable under FAA saving clause; Kartal’s class claim proceeds in court |
| Legality of commission reversals/charge‑backs as wage deductions under NY Labor Law §193 | Charge‑backs are unlawful deductions from wages | Charge‑backs were contractually agreed deductions and part of commission computation | Court: Charge‑backs were part of agreed commission computation (Pachter) and not illegal deductions; dismissal affirmed |
| Entitlement to overtime pay and minimum wage (Johnson & Kartal) | Plaintiffs claim misclassification; entitled to overtime/minimum wage | Plaintiffs were outside salespeople exempt under FLSA/NY regulations | Court: Plaintiffs were outside salespeople; exempt from overtime and minimum wage; claims dismissed |
| Precedential value of prior state case Weinstein and circuit split impact | NLRA/FAA issue must be resolved in favor of protecting concerted rights despite FAA policy favoring arbitration | FAA’s strong federal policy and Supreme Court precedents favor enforcing arbitration waivers; circuit decisions support enforcement | Court: Weinstein did not resolve NLRA conflict; follows Seventh Circuit (Lewis) and Ninth (Morris) over Fifth/Second, holding NLRA preempts enforcement of class waivers |
Key Cases Cited
- Lewis v. Epic Sys. Corp., 823 F.3d 1147 (7th Cir. 2016) (arbitration clause banning collective claims violates NLRA §7; unenforceable under FAA saving clause)
- Morris v. Ernst & Young LLP, 834 F.3d 975 (9th Cir. 2016) (same conclusion as Lewis: collective‑action waivers conflict with NLRA)
- Pachter v. Bernard Hodes Group, Inc., 10 N.Y.3d 609 (N.Y. 2008) (commission computation can permit adjustments; commission not ‘‘earned’’ until agreed computation is made)
- D.R. Horton, Inc. v. N.L.R.B., 737 F.3d 344 (5th Cir. 2013) (class/collective waivers enforceable; FAA compels arbitration and preempts NLRB position)
- Sutherland v. Ernst & Young LLP, 726 F.3d 290 (2d Cir. 2013) (upheld enforcement of arbitration class‑waiver under FAA)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (U.S. 2011) (requiring class arbitration can conflict with FAA’s objectives; supports enforcing arbitration terms)