On January 6th, 2023, a Maryland state court halted an employer’s attempt to sue three previous employees for breach of contract for refusing to engage in arbitration. The case in question is BookHolders v. DeHority et al., initiated by employer BookHolders, LLC (“BookHolders”) against three former employees after they reported minimum wage violations to the Virginia Department of Labor and Industry.
BookHolders is a Virginia-based college bookstore chain that employed three Virginia Tech students who submitted a report to the Virginia Department of Labor and Industry in October of 2022. In their complaints, the employees alleged that BookHolders was not paying them the state-mandated minimum wage of $11.00/hour.
After being notified of the complaints, BookHolders’ CEO sent letters to each former employee alleging that their complaints to the state agency violated the arbitration agreement they had signed when they began employment. The agreement specified that all disputes must be resolved through arbitration. BookHolders also demanded that the employees withdraw their complaints to the state.
The employees refused to withdraw their complaints, at which point, BookHolders filed individual breach of contract lawsuits against each former employee in Maryland state court.
Counsel for the employees filed a motion to dismiss the lawsuits under Maryland’s anti-SLAPP (Strategic Lawsuit Against Public Participation) statute, designed to prevent employers from retaliating against employees for reporting wrongdoing to state or federal government agencies. They argued that the employees’ reports to the Department of Labor were not a breach of their arbitration agreements and that the lawsuits were brought in bad faith to prevent them from reporting the wage theft violations to the state.
Like non-compete agreements, forced arbitration clauses are often hidden in lengthy employment contracts and can be weaponized by employers to silence a worker’s claims. These arbitration provisions are typically effective at intimidating employees into dismissing their claims or, at the very least, forcing them to engage in costly and burdensome arbitration, which often favors the employer.
The Maryland district court agreed with the defense counsel and granted the motion for dismissal. The Court’s decision reaffirms numerous Supreme Court opinions on the issue, which have held that employees have a constitutional right to file complaints with government agencies regarding violations of labor laws. The decision stands as an important reminder to employers that arbitration provisions do not allow employers to circumvent the law.