After the Illinois Supreme Court’s decision in January holding that a plaintiff need not show actual harm to be an “aggrieved person” under the Illinois Biometric Information Privacy Act (“BIPA”), parties litigating under BIPA have been testing other defenses. One of those defenses is whether BIPA matters can be compelled to arbitration pursuant to an arbitration provision set forth in the parties’ agreement.
On Tuesday, April 9, the First District Appellate Court of Illinois issued its decision in Liu v. Four Seasons Hotel, Ltd., 2019 IL App (1st) 182645, holding that a BIPA claim could not be compelled to arbitration based on the language of the employment agreement at issue. Specifically, the employment agreement provided that a dispute was subject to mandatory, binding arbitration if it “is based on one of the following types of claims as defined by law: (a) employment discrimination; (b) harassment as it relates to my employment; (c) a wage or hour violation; (d) or termination of my employment from the Hotel.” Defendant argued that plaintiffs’ BIPA claim was a “wage or hour” dispute because the scans of plaintiffs’ fingerprints were used to track the hours the plaintiffs worked and therefore, it was an “hour” violation claim. The appellate court disagreed.
First, under Illinois law, a party can only be required to arbitrate those issues “they have agreed to arbitrate.” 2019 IL App. (1st) 182645 ¶ 26. Second, the court found that “wage or hour” claims are recognized in Illinois and federal statutes as disputes relating to the withholding of compensation or failing to comply with wage and hour laws. 2019 IL App. (1st) 182645 ¶ 28. Finally, the appellate court held that BIPA is not a “wage or hour” statute, but a privacy law that “applies inside and outside the workplace,” and simply choosing to use fingerprints to monitor hours does not transform a BIPA claim into a “wage or hour” claim. 2019 IL App. (1st) 182645 ¶ 30.
While the appellate court’s ruling might seem like a setback for BIPA defendants, the good news for them is that the appellate court based its decision on the very narrow language in the employment agreement at issue, and therefore, the court’s decision in Liu would not necessarily control cases involving broader arbitration clauses. Parties should continue to file motions to compel arbitration so long as their agreements arguably cover BIPA claims.
Going forward, though, consider the following when reviewing, revising or drafting arbitration clauses in any type of agreement:
- Examine the breadth of your clause—in many cases, broader is better. Use language that is broad enough to cover any potential claims or disputes that may arise between the parties. For example, adding the term “relating to the agreement or relationship,” instead of simply stating “arising out of the agreement” expands the scope of what claims are subject to arbitration. 2019 IL App. (1st) 182645 ¶ 26.
- Think about whether you have a reasonable basis to incorporate the Federal Arbitration Act (“FAA”). Although the Illinois Arbitration Act embodies a policy that favors arbitration, Illinois courts have not always been as favorable when enforcing the statute. In contrast, the United States Supreme Court has consistently held that arbitration provisions governed by the FAA are enforceable. See Henry Schein, Inc. v. Archer & White Sales, Inc., ____ U.S. ____, 139 S. Ct. 524, 202 L. Ed. 480, 486 (2019) (holding that parties agreed to arbitrate the gateway issue of “arbitrability”); Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612 (2018) (holding that employment agreements requiring individualized arbitration must be enforced); DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463, 466, 471 (2015) (reversing denial of motion to compel arbitration because the FAA preempts state statute regarding unenforceability of class action waivers); Express Co. v. Italian Colors Rest., 570 U.S. 228, 234-35 (2013) (holding that a class action waiver is not invalid under the FAA, even though plaintiff’s costs to individually prosecute a claim may exceed any potential recovery); AT&T Mobility L.L.C. v. Concepcion, 563 U.S. 333 (2011).
- Consider adding a class action waiver. Again, the United States Supreme Court has enforced arbitration provisions containing class action waivers. See DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463, 466, 471 (2015); Express Co. v. Italian Colors Rest., 570 U.S. 228, 234-35 (2013); AT&T Mobility L.L.C. v. Concepcion, 563 U.S. 333 (2011). However, a class action waiver subject to Illinois law may face an uphill battle. See Kinkel v. Cingular Wireless, LLC, 223 Ill. 2d 1 (2006) (holding that class action waiver was unconscionable and unenforceable under the circumstances).
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