A new ruling may make it more difficult for a unionized employer operating in Delaware, New Jersey and Pennsylvania to use arbitration agreements to avoid fighting a Fair Labor Standards Act (FLSA) lawsuit in the federal courts.
When plaintiffs' claims rely only on their statutory rights under the FLSA, rather than their contractual rights under a collective bargaining agreement (CBA), they do not need to go through the arbitration process before filing an FLSA lawsuit, the 3rd US Circuit Court of Appeals held in Bell v. SEPTA, 2013 U.S. App. LEXIS 17166.
In Bell, a group of bus drivers and trolley operators sued their employer, the local transit authority, seeking unpaid overtime for time they spent before every work day performing clerical tasks and safety inspections.
The employer moved to dismiss the lawsuit. Because the employees' CBAs include provisions that require them to submit to arbitration any dispute involving the application, implementation, or interpretation of any of the provisions, and because the employees' pre-shift activities were addressed in their CBA, they would have to submit to arbitration before pursuing their claims in court, the employer argued.
A lower court agreed and dismissed the case. The employees appealed to the 3rd Circuit, which overturned the dismissal and sent the case back to the lower court for further proceedings.
Whether or not the employees' clerical tasks and safety inspections were covered under the CBA does not matter, the 3rd Circuit held, because the result would have been the same either way. If an arbitrator had found that the CBA covered the pre-shift tasks, the employees would still have a claim that the CBA violated the FLSA by underpaying them; likewise, if the arbitrator had found that the CBA did not cover the pre-shift tasks, then the employees would not have been forced to arbitrate their claims prior to litigation, rendering the lawsuit moot.
In "stark contrast," the court noted a ruling it had issued 23 years ago in Vadino v. A. Valey Engineers, 903 F.2d 253 (3d Cir. 1990). In Vadino, the plaintiffs' FLSA claim actively depended on an interpretation of their CBA, which governed the wage rate at which they were to be paid and thereby how much overtime they would be owed. Requiring arbitration before litigation was appropriate in that case, the court observed.