The Eighth Circuit Court of Appeals issued an important pro-arbitration opinion last week, compelling individual arbitration of a putative Fair Labor Standards Act (FLSA) collective action. Owen v. Bristol Care, Inc., No. 12-1719, 2013 WL 57874 (8th Cir. Jan. 7, 2013). With this opinion, the Eighth Circuit joins several other circuit courts that have found class waivers enforceable in FLSA cases, and it joins the majority of district courts that have refused to follow the National Labor Relations Board’s (NLRB) stance against class waivers in the employment context.
The employee-plaintiff in Owen alleged that she and similarly situated employees had been misclassified as exempt from overtime under the FLSA and state overtime laws. The employer moved to compel arbitration at the district court. The plaintiff opposed arbitration, arguing her arbitration agreement was illusory and unconscionable, in part because it contained a class/collective action waiver. In February 2012, the district court denied the employer’s motion, holding: “In the employment context, waivers of class arbitration are not permissible.” The district court reached this conclusion by relying on the NLRB’s controversial decision in D.R. Horton, in which the NLRB opined that class action waivers in mandatory arbitration agreements are unenforceable. The employer appealed.
The Eighth Circuit reversed the lower court’s decision on January 7, stating “the FLSA contains no ‘contrary congressional command’ as required to override the [Federal Arbitration Act (FAA)].” In reaching this conclusion, the court rejected the plaintiff’s argument that the FLSA creates a right to pursue a collective action, noting “if an employee must affirmatively opt in to any such class action [under § 216(b) of the FLSA], surely the employee has the power to waive participation in a class action as well.” The court also rejected the plaintiff’s argument that the National Labor Relations Act and the Norris-LaGuardia Act indicated a congressional command to override the FAA, noting the FAA was reenacted in 1947, “twelve years after the NLRA[,] fifteen years after the passage of the Norris-LaGuardia Act,” and “nine years after the passage of the FLSA.” The court held that the reenactment of the FAA suggested “Congress intended its arbitration protections to remain intact even in light of the earlier passage of three major labor relations statutes.”
The court also refused to follow the NLRB’s controversial D.R. Horton decision. The court distinguished the facts of D.R. Horton from the facts of the case before it and held that it would owe no deference to the NLRB’s reasoning even if the facts were similar. The court noted that “nearly all of the district courts to consider [the NLRB’s ruling in D.R. Horton] have declined to follow it,” citing several examples. The court noted its conclusion was “consistent with all of the other courts of appeals that have considered this issue and concluded that arbitration agreements containing class waivers are enforceable in FLSA cases” and “consistent with more than two decades of pro-arbitration Supreme Court precedent.”
Nevertheless, the battle over the validity of arbitration agreements in the employment context continues. Although all circuit courts of appeals to consider the issue have “concluded that arbitration agreements containing class waivers are enforceable in FLSA cases,” not all lower courts are convinced. On the same day the Eighth Circuit decided Owen, a magistrate judge in the Northern District of Alabama denied the parties’ joint motion to refer an FLSA action to arbitration absent a written arbitration agreement. Ryan v. Event Operations Group, Inc., No. 2:12-cv-00670-MHH (N.D. Ala. Jan. 7, 2013). The magistrate judge opined that FLSA claims are unsuited to arbitration, stating: “Fundamental principles which animate the Federal Arbitration Act and the [FLSA] are at odds with the parties’ request to submit this FLSA action to arbitration.” Contrary to the rulings of all courts of appeals that have considered this issue, the magistrate judge stated in a footnote: “If there were a written arbitration clause that allegedly encompassed the plaintiffs’ FLSA claims, the Court doubts that it would be enforceable.”
The opinion in Ryan is the minority view, but it highlights that some courts remain hostile to mandatory arbitration agreements in the employment context. Many courts, like the Eighth Circuit in Owen, follow the “more than two decades of pro-arbitration Supreme Court precedent” when ruling on motions to compel arbitration of employment claims, but some courts still resist. The battle over the validity of arbitration agreements between employers and employees thus rages on.
Flyn L. Flesher is Knowledge Management Counsel in Ogletree Deakins’ Houston office.