In a significant victory for employers, the Eighth Circuit, in Owen v. Bristol Care Inc., No. 12-1719, overturned a Missouri district court ruling that class action waivers were unenforceable in FLSA cases. In September 2011, Sharon Owen brought an action on behalf of herself and other current and former employees similarly situated, against her employer, Bristol Care, Inc. (“Bristol Care”), a company operating residential care facilities for elderly. Owen claimed that Bristol Care had deliberately misclassified administrators, like Owen, as exempt and had failed to pay them overtime compensation. When Owen was hired, she had signed a Mandatory Arbitration Agreement (the “Agreement”), which provided that she and the company would resolve all claims and controversies, including claims for “wages or other compensation,” by binding arbitration. The Agreement also contained a class action waiver prohibiting parties “from arbitrating claims subject to [the] Agreement as, or on behalf of, a class.”
Bristol Care moved to compel the enforcement of the Agreement, and the district court denied the motion, holding that the FLSA invalidates class action waivers in arbitration agreements because the Act provides for the right to bring a class action. The district court relied primarily on In re D.R. Horton, Inc., 357 NLRB No. 184 (Jan. 3, 2012) (“D.R. Horton”), a National Labor Relations Board (“NLRB”) decision, and distinguished the Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), which upheld the enforceability of a class waiver in a consumer contract, ruling that that decision did not apply in the employment context.
The Eighth Circuit disagreed, recognizing the strong federal policy set forth in the Federal Arbitration Act (“FAA”), which favors arbitration agreements. The Court held that nothing in either the text or legislative history of the FLSA indicates a congressional intent to prohibit employees from agreeing to arbitrate individually. It also held that there was no inherent conflict between the FLSA and the FAA and that the FLSA contains no “contrary congressional command,” which is required to override the FAA. Although Owen argued that by identifying “[t]he right . . . to bring an action by or on behalf of an employee, and the right of any employee to become a party plaintiff to any such action,” the FLSA creates the right to pursue a class action, the Eighth Circuit held that the FLSA also requires an employee to affirmatively opt in to any such class action, therefore, allowing an employee to waive such a right.
Owen then noted that the National Labor Relations Act of 1935 (“NLRA”), the Norris-LaGuardia Act, and the FLSA, which all sought to protect workers’ rights to engage in concerted activity, were all passed well after the FAA. The Eighth Circuit held, however, that missing from this analysis was the fact that the FAA, originally enacted in 1925, had been reenacted in 1947, suggesting that Congress had intended—even in light of three major labor relations statutes—to keep the arbitration protections intact. The Court also refused to follow the NLRB’s ruling in D.R. Horton that a class action waiver was unenforceable in a similar FLSA action because it conflicted with the rights protected by Section 7 of the NLRA. The Court ruled that the D.R. Horton case held little persuasiveness because the NLRB limited its holding to “arbitration agreements barring all protected concerted action.” The Agreement Owen had signed, however, did not prevent her from filing an action with an administrative agency which subsequently could investigate and bring an action on behalf of a class of employees. Even if the D.R. Horton holding was not limited, the Court held that it still would owe no deference to its reasoning or its interpretation of other pro-arbitration Supreme Court decisions, like Concepcion.
Although to date, no other circuit court has considered D.R. Horton, which is pending before the Fifth Circuit, nearly all of the district courts that have addressed the case have declined to follow it. Furthermore, the Eighth Circuit’s ruling was consistent with all other courts of appeal which had ruled that class action waivers were enforceable in the FLSA context and the more than two decades of pro-arbitration Supreme Court decisions that had come before it. The Court further ruled that the Supreme Court’s decision in Gilmer v. Interstate/Johnson Lane Corp., which involved a complaint of age discrimination in the workplace, foreclosed Owen’s argument that the Supreme Court precedent upholding the enforceability of class waivers is limited to the consumer context. Two more cases involving class action waivers, however, will soon be heard by the Supreme Court, American Express Co. v. Italian Colors Rest. (No. 12-133) and Oxford Health Plans, L.L.C. v. John Ivan Sutter, M.D. (No. 12-135), proving that the debate regarding class action waivers is far from over.