An employer may include in its mandatory arbitration agreement a waiver of the right to bring collective actions under the Fair Labor Standards Act (FLSA), a federal appeals court ruled January 7.
Arbitration agreements can help an employer find a fair, efficient and cost-effective resolution to employment disputes. However, agreements that include a waiver of the right to bring class actions and would require arbitration of FLSA claims on an individual basis have been subject to numerous challenges, including claims that they violate the National Labor Relations Act (NLRA).
In Owen v. Bristol Care, +2013 U.S. App. LEXIS 356 (8th Cir. 2013), the 8th Circuit Court of Appeals held that such waivers are enforceable despite D.R. Horton, Inc., +357 NLRB No. 184 (Jan. 3, 2012), in which the National Labor Relations Board (NLRB) ruled that they violate the NLRA.
Appeals courts for the 3rd, 4th, 5th, 9th and 11th Circuits also have concluded that arbitration agreements containing class action waivers are enforceable in FLSA cases. As a result, an employer operating in the following states has strong precedents for including FLSA collective action waivers in arbitration agreements: Alabama, Alaska, Arizona, Arkansas, California, Delaware, Florida, Georgia, Hawaii, Idaho, Iowa, Louisiana, Maryland, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Oregon, Pennsylvania, South Carolina, South Dakota, Texas, Virginia, Washington and West Virginia.
The D.R. Horton decision is currently under appeal in the 5th Circuit Court of Appeals and a decision is expected before long. Until then, adding a class action waiver to a mandatory arbitration agreement, whether under the FLSA or any other statute, could still land an employer in hot water with the NLRB. An employer should consult with counsel before including such language.