Class Arbitration Waivers Validated by the Eleventh Circuit in FLSA Actions

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The Eleventh Circuit in Walthour v. Chipio Windshield Repair, LLC, No. 13-11309 (11th Cir. March 21, 2014) recently joined the Second, Fourth, Fifth, and Eighth Circuits in upholding class arbitration waivers in a Fair Labor Standards Act (“FLSA”) action.  Plaintiffs in Walthour argued that the statutory right to file a collective action under the FLSA cannot be waived, as it is a substantive right.  Plaintiffs pointed to the statute’s text, legislative history and purposes to support their position that the FLSA’s right to collective action trumps the Federal Arbitration Act’s (“FAA”) validation of class and collective action waivers.  Plaintiffs had relied, in part, on an old U.S. Supreme Court case, Brooklyn Savings Bank v. O’Neil, 324 U.S. 697, 65 S. Ct. 895, (1945), in which the Supreme Court “held that a plaintiff cannot waive her right to liquidated damages in a FLSA settlement when there is no genuine dispute about whether she is entitled to them.”  However, the Eleventh Circuit distinguished O’Neil by explaining “[t]hat case addressed the waiver of a substantive right, i.e., the individual employee’s right to recover liquidated damages for violations of the FLSA. In this case, we address only the waiver of a litigation mechanism, i.e., the right to bring a collective action on behalf of others.”  Relying on recent U.S. Supreme Court precedent, including Am. Express Co. v. Italian Colors Rest., 570 U.S. ___, ___, 133 S. Ct. 2304 (2013), AT&T Mobility LLC v. Concepcion, 563 U.S. ___, ___, 131 S. Ct. 1740 (2011), and CompuCredit Corp. v. Greenwood, 565 U.S. ___, ___, 132 S. Ct. 665 (2012), the Eleventh Circuit concluded that “[a]fter examining the FLSA’s text, legislative history, purposes, and these Supreme Court decisions, we discern no ‘contrary congressional command’ that precludes the enforcement of plaintiffs’ Arbitration Agreements and their collective action waivers.” 

In drawing its conclusion, the Eleventh Circuit noted that “all of the circuits to address this issue have concluded that § 16(b) [of the FLSA] does not provide for a non-waivable, substantive right to bring a collective action.”  The Court summarized the other Circuit Court holdings as follows:

  • Sutherland v. Ernst & Young LLP, 726 F.3d 290, 296-97 & n.6 (2d Cir. 2013) (determining that the FLSA does not contain a “contrary congressional command” that prevents an employee from waiving his or her ability to proceed collectively and that the FLSA collective action right is a waivable procedural mechanism);
  • Owen v. Bristol Care, Inc., 1050, 1052-53 (8th Cir. 2013) (determining that the FLSA did not set forth a “contrary congressional command” showing “that a right to engage in class actions overrides the mandate of the FAA in favor of arbitration”);
  • Carter v. Countrywide Credit Indus., Inc., 362 F.3d 294, 298 (5th Cir. 2004) (rejecting the plaintiffs’ claim that their inability to proceed collectively deprived them of a substantive right to proceed under the FLSA because, in Gilmer, the Supreme Court rejected similar arguments regarding the ADEA);
  • Adkins v. Labor Ready, Inc., 303 F.3d 496, 503 (4th Cir. 2002) (determining that a plaintiff failed to point to any “suggestion in the text, legislative history, or purpose of the FLSA that Congress intended to confer a non-waivable right to a class action under that statute” and that the plaintiff’s “inability to bring a class action, therefore, cannot by itself suffice to defeat the strong congressional preference for an arbitral forum”);
  • cf.  D.R. Horton, Inc. v. NLRB, 737 F.3d 344, 362 (5th Cir. 2013) (determining that the National Labor Relations Act does not contain a contrary congressional command overriding the application of the FAA).

Topics:  Arbitration, Class Action Arbitration Waivers, Employer Liability Issues, FLSA

Published In: Alternative Dispute Resolution (ADR) Updates, Civil Procedure Updates, General Business Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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