Not all employment-related claims are subject to an employment agreement’s mandatory arbitration clause, according to the Illinois Appellate Court for the First District.
In Liu v. Four Seasons Hotel, LTD., 2019 IL App (1st) 182645 (April 9, 2019), the plaintiffs, all employees of the defendant hotels, filed a class action alleging their employer violated the Biometric Information Privacy Act (740 ILCS 14/1 et seq. (West 2016)) in their method of collecting, using, storing, and disclosing employees’ biometric data, namely fingerprints taken for timekeeping purposes. Defendants filed a motion to compel arbitration, arguing that each employee signed an employment agreement requiring “wage and hour violation” claims, as well as the initial question of arbitrability, be submitted to and decided by an arbitrator.
Illinois enacted the Biometric Information Privacy Act in 2008 to help regulate the collection, use, safeguarding, handling, storage, retention, and destruction of biometric identifiers and information. These identifiers include things like retina or iris scans, fingerprints, voiceprints, hand scans, or face geometry scans. The Act provides a private right of action that permits a prevailing party to recover damages of $1000 or actual damages (if greater) for negligent violation of the Act and $5000 or actual damages (if greater) for intentional or reckless violations, in addition to attorney’s fees and costs.
The plaintiffs, on behalf of themselves and all those similarly situated, claimed defendants scanned their fingerprints, placed and maintained that biometric data in a database, and then used it for timekeeping purposes. They alleged violations of the Act in defendants’ failure (1) to inform employees that it discloses fingerprint data to an out-of-state third party vendor; (2) to inform employees in writing of the specific purpose and length of time for which their fingerprints were being collected, stored, and used; (3) to provide a retention schedule and guidelines for permanent deletion of biometric information; and (4) to acquire written releases from employees to collect biometric information.
The trial court denied the defendant’s Motion to Compel Arbitration, and the Appellate Court affirmed. The Appellate Court held the claims did not fit within the “wage or hour violation” category of disputes subject to mandatory arbitration under the employment agreements. The defendants argued the sole purpose for requiring employees to scan their fingerprints was to monitor the hours worked, which necessarily makes it a “wage or hour violation” claim. The Court, however, looked to how this phrase has been used in other contexts, such as under Illinois’ Wage Payment Act or Minimum Wage Law or the federal Fair Labor Standards Act. In all those enactments, wage and hour violation claims involve allegations of an employer wrongfully withholding compensation or failing to pay employees overtime rates. Plaintiffs here, in contrast, alleged nothing beyond violations of the Biometric Information Privacy Act. They made no claims of improperly withheld compensation or hours violations.
The Court noted, citing to Rosenbach v. Six Flags Entertainment Corp., 2019 IL 123186, that the Act is a privacy rights law that applies inside and outside the workplace. “Simply because an employer opts to use biometric data, like fingerprints, for timekeeping purposes does not transform a complaint into a wages or hours claim.”
This opinion, as we noted in an earlier blog post addressing Rosenbach, creates a strong incentive for employers to conform to the Act to prevent problems before they occur and subject them to potential civil litigation, as mandatory arbitration clauses may not cover the claims.