11th Circuit Affirms Collective Action Can Be Waived in Arbitration Agreement

For years, a recurring topic of debate amongst federal courts of all levels has been the issue of whether an arbitration agreement that waives an employee’s statutory right to bring a collective action under the Fair Labor Standards Act (“FLSA”) is enforceable under the Federal Arbitration Act (“FAA”). On January 6 of this year, we posted a review of 2013 cases that included a laudatory reference to the District Court’s (Judge Totenberg) opinion in Walthour v. Chipio Windshield Repair, LLC, [1] in which the court demonstrated how the right to collective action under the FLSA was intended by Congress to be a substantive, non-waivable right. However (as we noted then), after making its point, the court “yielded to the reality of overwhelming contrary precedent and upheld the collective action waiver.” Late last month, the 11th Circuit affirmed that decision, holding for the first time that a waiver of the right to collective action under the FLSA is, indeed, enforceable.

A bit of background may be useful before we jump into the specifics of this seminal case. The FLSA was enacted in 1938 for the primary purpose of protecting “employees who lack sufficient bargaining power”; [2] accordingly, it grants a statutory right to collective actions against employers. 29 U.S.C. § 216(b). [3] Since its enactment, both the Supreme Court and the 11th Circuit have made clear that contractual waiver of certain rights afforded by the FLSA is not permitted; [4] however, until Walthour, neither court had addressed the enforceability of the collective action provision specifically. And perhaps arbitration law is the only force strong enough to successfully waive such an ostensibly clear non-waivable right: the FAA represents a “liberal federal policy favoring arbitration agreements,”[5] and “establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.” [6]

In Walthour, the plaintiff-employees had signed an employment agreement with the defendant-employers, which contained an arbitration provision. It stated, in relevant part:

“By signing this agreement, employee and employer are each giving up . . . his/her/its right to participate in aclass action because all claims will be resolved exclusively through arbitration. Employee and employer agree that each may bring claims against the other only in his/her/its individual capacity and not as a plaintiff or class member in any purported class or representative proceeding.”

An overtime wage dispute arose, and plaintiffs filed suit in federal court. Defendants moved to compel arbitration pursuant to the above employment agreement; plaintiffs countered that the FLSA established an un-waivable right to file a class action, and thus the contractual waiver contained in the arbitration provision was not enforceable. As noted above, the District Court for the Northern District of Georgia ultimately disagreed and compelled arbitration. [7]  The 11th Circuit affirmed, stating that “a contrary congressional command in the FLSA” is required in order “to override the FAA,” and cited the Supreme Court’s decision in CompuCredit [8] as guidance in addressing this issue; specifically, by “focus[ing] primarily on the statutory text of the FLSA to determine whether that text precludes a waiver of the statutory right to bring a collective action.”

The court then went on to review other pertinent Supreme Court precedent, citing SCOTUS’s decisions in Gilmer [9] (holding that “[m]ere inequality in bargaining power . . . is not a sufficient reason to hold that arbitration agreements are never enforceable in the employment context”) and Italian Colors Restaurant [10] (rejecting plaintiffs’ claims that the waiver of class arbitration barred “effective vindication” of their federal statutory rights under antitrust laws) as support for the 11th Circuit’s own conclusion in Walthour that collective action waivers are permissible in this narrow arbitration context. Indeed, the Walthour court relied heavily on that precedent to reject plaintiffs’ argument that the “right” to bring collective actions is non-waivable:

“As interpreted in Italian Colors Restaurant, the Supreme Court in Gilmer had ‘no qualms’ about enforcing an arbitration agreement that would result in the parties forgoing their right to proceed collectively . . . [Although these decisions] addressed the ADEA, [the rationale] applies with equal force to the FLSA, because, as noted [], the ADEA expressly adopts the FLSA’s class action provision.”

Ultimately, the court in Walthour concluded that, after examining Supreme Court precedence and the text, legislative history, and purposes of the FLSA, “we discern no ‘contrary congressional command’ that precludes the enforcement of plaintiffs’ Arbitration Agreements and their collective action waivers.”

Although this decision is certainly a victory for arbitration, we can’t help but pay homage to the victory’s bittersweet tinge, as a little part of employees’ rights somewhere utters its death rattle.

 


[1] 1:12-CV-1491-AT (Feb. 27, 2013).

[2] Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 707 n.18 (1945).

[3] “An action to recover the liability prescribed in [§ 216(b)] may be maintained against any employer . . . by any one or more employees for and in behalf of himself or themselves and other employees similarly situated.”

[4] See, e.g., Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 707 (1945).

[5] Caley v. Gulfstream Aerospace Corp., 428 F.3d 1359, 1367 (11th Cir. 2005).

[6] Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983).

[7] Walthour et al v. Chipio Windshield Repair, LLC et al, 1:12-CV-1491-AT (Feb. 27, 2013).

[8] CompuCredit Corp. v. Greenwood, 132 S. Ct. 665 (2012)

[9] Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 33, 111 S. Ct. 1647, 1652 (1991).

[10] Am. Express Co. v. Italian Colors Rest., 133 S. Ct. 2304, 2309 (2013)

About these ads

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 93 other followers

%d bloggers like this: