Supreme Court Agrees to Hear Taco Bell Overtime Dispute

The U.S. Supreme Court building is seen in Washington on Oct. 5, 2021. Kevin Dietsch/Getty Images

The Supreme Court announced it will consider whether an hourly fast-food worker allegedly denied overtime pay is required to take her proposed wage-and-hour class-action lawsuit against a large Taco Bell franchisee to arbitration, instead of pursuing it in federal court.

The case, Morgan v. Sundance Inc., court file 21-328, comes from the St. Louis-based U.S. Court of Appeals for the 8th Circuit. The Supreme Court approved the petition for certiorari, or review, on Nov. 15, in an unsigned order.

The respondent, Sundance Inc., owns upwards of 150 Taco Bell franchises throughout the country. The petitioner, Robyn Morgan, worked at one of those franchises in Osceola, Iowa, as an hourly employee for three months in 2015.

Morgan was dismayed by the company’s policy of “shifting” hours that employees worked in one week and recording them for the following week, so that the total number of recorded hours in any given week would never exceed 40, at which time overtime pay rates were supposed to kick in.

“As a result of this shifting, Ms. Morgan and other crew members were not paid for all of the hours they worked and were not paid overtime when they worked more than 40 hours in a single week,” according to her petition that was docketed Sept. 1.

Morgan and other crew members also were sometimes instructed to clock out and to continue working off the clock, a practice the petitioner alleges violates the federal Fair Labor Standards Act (FLSA). She launched a nationwide collective action under FLSA on behalf of all similarly situated hourly employees of Sundance franchises.

Morgan’s suit came two years after Sundance defended a similar proceeding in Michigan.

Sundance asked for Morgan’s claim to be thrown out, arguing it was duplicative of the Michigan suit, Wood v. Sundance Inc. The request was denied and in 2019, Sundance asked for the two cases to be mediated jointly. Later, the Wood plaintiffs settled out of court, but Morgan didn’t.

The federal district court in Iowa City denied the company’s motion to compel arbitration of Morgan’s claim, concluding Sundance’s strategic decision to avoid arbitration for more than seven months and move forward with participating in the litigation in court waived its right to arbitration.

The 8th Circuit voted 2–1 to reverse, finding in March that because the litigation process was barely underway, “Morgan was not prejudiced by Sundance’s litigation strategy.”

Federal courts of appeal disagree on the question of whether a party is required to prove prejudice to forfeit the right to compel arbitration.

But the dissenting opinion in the 8th Circuit ruling said Morgan was treated unfairly: “When a party waits to seek arbitration until after it loses a motion to transfer venue, it demonstrates an effort to play ‘heads I win, tails you lose’—a game that is inconsistent with exercising a right to arbitration.”

In a Supreme Court brief, Sundance pointed out that Morgan had signed an agreement “at the start of her employment that, among other things, compelled the arbitration of her federal wage and hour claims in this case.” The company “strenuously denies Morgan’s allegations of off-the-clock work or failure to pay overtime.”

Morgan’s attorney, Karla Ann Gilbride of Public Justice P.C. in the nation’s capital, was pleased the high court agreed to hear the case.

“We are hopeful that the Supreme Court will resolve the circuit split and hold that arbitration should be treated just like any other contractual right,” Gilbride told The Epoch Times in an emailed statement.

“Further, we hope that the Supreme Court will make clear that parties cannot play forum games and switch to arbitration whenever court proceedings become unfavorable.”

The counsel of record for Sundance Inc., Reyburn Williams Lominack III of Fisher & Phillips LLP in Columbia, South Carolina, didn’t immediately respond to a request by The Epoch Times for comment.