On August 4, 2023, in In re IBM Arbitration Agreement Litigation, the Second Circuit upheld an arbitration agreement that required employees to arbitrate any claims arising from their termination and that set a deadline for filing claims, including age discrimination claims under the Age Discrimination in Employment Act of 1967 (ADEA). In doing so, the Second Circuit rejected plaintiffs’ claims that this latter provision was unenforceable because it did not incorporate a “piggybacking” rule—a judicial exception to the ADEA’s administrative exhaustion requirements—finding that this rule was not a substantive right and was therefore subject to waiver in a contract. The Second Circuit also found that the presumption of public access to judicial documents is outweighed by the Federal Arbitration Act’s (FAA) strong policy in favor of enforcing arbitral confidentiality provisions and concluded that plaintiffs could not evade their confidentiality obligations by attaching confidential documents to a motion.
* * *
Plaintiffs are a group of former IBM employees, all of whom were over 40 years old when terminated, who alleged that IBM forced out thousands of older employees in order better to compete with newer technology companies. Upon their termination, the 26 plaintiffs entered into separation agreements with IBM that included an arbitration provision that, among other things, specified deadlines for filing claims and included confidentiality obligations. Plaintiffs missed the deadline set forth in the arbitration provision to bring the ADEA claims, but nevertheless thereafter tried to bring those claims in arbitration. After the plaintiffs’ arbitrations were dismissed in an arbitral forum as untimely, plaintiffs brought suit seeking a declaration that the deadline was unenforceable because it did not incorporate the “piggybacking” rule—a judge-made exception to the ADEA’s exhaustion requirements.
Piggybacking Rule. The ADEA requires that a prospective plaintiff file a charge with the EEOC at least 60 days before filing an ADEA suit in federal court. And, a plaintiff seeking to pursue an ADEA claim must file an EEOC charge within 300 days of the alleged discriminatory conduct. But, the single-filing rule, or piggybacking rule, is a procedural exception to this timing requirement, which arises out of case law. Under the piggybacking rule, where more than one plaintiff allegedly has claims “aris[ing] out of similar discriminatory treatment in the same time frame,” and one plaintiff has timely filed his EEOC complaint, additional plaintiffs may join that action later and their claims will be considered timely. In other words, a second plaintiff can “piggyback” onto the first plaintiff’s timely EEOC filing. In this case, other former IBM employees had timely filed ADEA claims with the EEOC, and plaintiffs—who had missed the deadline—sought to “piggyback” off those charges.
The Second Circuit affirmed the district court’s rejection of plaintiffs’ argument that the piggybacking rule affords plaintiffs a substantive right under the ADEA. Citing the Supreme Court’s decision in 14 Penn Plaza LLC v. Pyett, 556 U.S. 247 (2009), along with prior Second Circuit precedent, the Second Circuit found that “the piggybacking rule is not a substantive right under the ADEA and is thus waivable.” In other words, because the ADEA’s limitations period is a procedural right, and not a substantive right, it may be waived by contract.
Confidentiality Concerns. The district court also addressed what it described as a “housekeeping matter,” but which is an issue that often has great significance for employers in litigation—IBM’s motion to seal confidential documents obtained by plaintiffs’ counsel, who represented claimants bringing ADEA claims against IBM in many confidential arbitration proceedings with IBM, and submitted by plaintiffs as purported global evidence of IBM’s alleged scheme to discriminate against workers on the basis of age as part of their motion for summary judgment. IBM opposed plaintiffs’ motion for summary judgment, moved to seal plaintiffs’ motion, and moved to dismiss under Rule 12(b)(6). The court granted IBM’s motion to seal upon finding that the documents were not “judicial documents” and were “subject to only a weak presumption of public access” that was overridden by “the FAA’s strong policy in favor of enforcing arbitral confidentiality provisions,” and granted IBM’s motion to dismiss. In doing so, the district court noted that plaintiffs had initially sued to invalidate the confidentiality provision at issue, and found that denying IBM’s sealing request “would be to grant Plaintiffs the relief they sought in the first instance.” In upholding this decision, the Second Circuit found that “[t]he district court correctly observed that allowing unsealing under such circumstances would create a legal loophole allowing parties to evade confidentiality agreements simply by attaching documents to court filings.… Plaintiffs’ counsel may not end-run the Confidentiality Provision by filing protected materials and then invoking the presumption of access to judicial documents.”
The Second Circuit decision is part of a continuing trend by the courts to enforce employee arbitration agreements. As noted by the Second Circuit, quoting Supreme Court precedent, under the FAA, “courts must rigorously enforce arbitration agreements according to their terms, including … the rules under which that arbitration will be conducted.”
Here, the Second Circuit determined that the piggybacking rule was subject to waiver by contract given that it was not a substantive right. Accordingly, employers should ensure arbitration agreements do not seek waiver of substantive rights to ensure the enforceability of such agreements. In this case, the procedural “piggybacking rule” did not seek to shorten the applicable ADEA limitations period, but there have been recent decisions by other courts finding that parties may agree to contractually shorten a limitations period in an arbitration, see, e.g., Rusis v. Int’l Bus. Machs. Corp., 529 F. Supp. 3d 178 (S.D.N.Y. 2021), to the extent that such an agreement does not make the statutory limitations period unreasonably short and therefore operate as a waiver of the plaintiff’s claim, see, e.g., Castellanos v. Raymours Furniture Co., 291 F. Supp. 3d 294 (E.D.N.Y. 2018); Boaz v. FedEx Customer Info. Servs., Inc., 725 F.3d 603 (6th Cir. 2013); Ragone v. Atl. Video at Manhattan Ctr., 595 F.3d 115 (2d Cir. 2010). Further, this decision is an important precedent for employers seeking to continue to maintain the confidentiality of arbitration documents that are filed in connection with court proceedings.
Sending an e-mail through this web site does not create an attorney-client relationship. You should not send us any information through this web site that you would want treated confidentially.