Earlier this summer, the Second Circuit upheld a district court decision compelling individual arbitration of a brokerage employee’s federal and state wage-and-hour claims and enforcing a class and collective action waiver in the employee’s employment agreement. See Cohen v. UBS Financial Services, Inc., 2015 WL 3953348 (2d Cir. June 30, 2015).
The employee had argued that FINRA Rule 13204 (in the Code of Arbitration Procedure for Industry Disputes) was a “contrary congressional command” sufficient to supersede the Federal Arbitration Act’s command to enforce arbitration agreements as written. While this argument is similar to the one I made (with my co-author Barbara Black) in Investor Protection Meets the Federal Arbitration Act, 1 Stan. J. Complex Litig. 1 (2012) (contending that FINRA Rules 2268 and 12204 supersede class action waiver in customer agreements), that article recognizes an important distinction between class action waivers in customer rather than employee agreements. Because Rule 2268, by its terms, applies only to firms’ agreements with their customers, that rule cannot be invoked as superseding the class action waiver in a broker-dealer’s agreement with its employees.
Perhaps the FINRA Dispute Resolution Task Force, chaired by Professor Black, will consider this discrepancy and recommend harmonizing the FINRA rules regulating employee and investor agreements with firms.
