Collective Action Waiver Client Alert

Recently, the U.S. Court of Appeals for the Eleventh Circuit upheld a class action waiver in an arbitration clause, compelling employees who had attempted to bring a collective action under the Fair Labor Standards Act to arbitrate their claims on an individual basis. The employees in Walthour v. Chipio Windshield Repair, LLC, argued that the waivers were unenforceable and that they had a statutory right to file a collective action under the FLSA, but the court disagreed. After analyzing the FLSA’s text, legislative history and purposes as well as relevant Supreme Court precedent, the court held that the FLSA does not override the Federal Arbitration Act and that the right to bring a collective or class action may be waived.

With this decision, the Eleventh Circuit joins the Second, Fourth, Fifth, and Eighth Circuits in enforcing collective action waivers in FLSA cases. In Sutherland v. Ernst & Young LLP, the Second Circuit explained that the FLSA does not prohibit the waiver of collective action claims and rejected the employee’s argument that the waiver was unenforceable solely because the costs of arbitrating on an individual basis would defeat any economic incentive to pursue her claims. In Carter v. Countrywide Credit Industries, Inc., the Fifth Circuit enforced the waiver, holding that FLSA claims may be subject to binding arbitration and rejecting the employees’ claim that they had a “substantive right” to proceed collectively. The Eighth Circuit also determined that the FLSA did not supersede the FAA’s mandate in favor of arbitration in Owen v. Bristol Care, Inc., and the Fourth Circuit upheld a class action waiver in Muriithi v. Shuttle Express, Inc., finding that the state law doctrine of unconscionability could not be used to eliminate a provision in an arbitration agreement which barred classwide procedures.

The Eleventh Circuit’s decision allows employers – particularly those located under the court’s jurisdiction in Alabama, Florida, and Georgia – to combat FLSA collective actions on the front end by simply including class or collective action waivers in their arbitration agreements. It is worth noting, however, that while courts now generally agree that collective action waivers are valid and enforceable, there may be other issues to consider in drafting and implementing them. For example, a 2013 decision from the Fifth Circuit suggests that class action waivers may potentially be contested on NLRA Section 8 grounds. In D.R. Horton, Inc. v. N.L.R.B., the court reversed the NLRB’s finding that the class waiver interfered with the employees’ right to engage in concerted activity protected by Section 7 of the NLRA. But, it also upheld the Board’s conclusion that the particular wording of that agreement violated Section 8 because it was susceptible to being misconstrued by employees to prohibit them from filing unfair labor practice claims with the Board.

More jurisdictions will likely follow the lead of the Eleventh Circuit and its sister circuits in enforcing class and collective action waivers. Given the evolving state of the case law, careful drafting will be the key to an effective class action waiver that could potentially spare employers from protracted FLSA collective action litigation.

Topics:  Arbitration, Class Action, Collective Action Waivers, Collective Actions, FLSA

Published In: Alternative Dispute Resolution (ADR) Updates, Civil Procedure 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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