The U.S. Court of Appeals for the Eleventh Circuit has become the fifth appellate court to hand down a victory for employers in the fight over enforceability of class action waivers. The court ruled that an arbitration agreement that waives an employee’s right to bring a collective action under the Fair Labor Standards Act (FLSA) is enforceable, joining the Second, Fourth, Fifth, and Eighth Circuits allowing waivers of FLSA collective action claims.
In Walthour v. Chipio Windshield Repair, LLC, et al., issued on March 21, 2014, the Eleventh Circuit affirmed a Georgia district court’s order compelling arbitration and dismissing the plaintiffs’ complaint. The plaintiffs were employed as window repairers, and had signed arbitration agreements providing that “any kind of employment disagreement would be submitted to arbitration.” They further agreed that they could bring claims only individually, “not as class members,” and that they were “giving up their right to participate in a class action.” Despite these agreements, the plaintiffs filed a putative collective action in federal court, alleging their employer failed to pay the minimum wage and overtime.
After examining the FLSA’s text and legislative history, the Eleventh Circuit found no “contrary congressional command” that precluded the enforcement of the plaintiffs’ arbitration agreements and their collective action waivers. Relying on the intersection between two U.S. Supreme Court decisions, the appellate court squarely rejected the plaintiffs’ argument that the right to a collective action, which is set forth in the language of the statute, is a non-waivable, substantive right.
The Supreme Court’s 1991 Gilmer v. Interstate/Johnson Lane Corp. ruling held that an Age Discrimination in Employment Act (ADEA) claim could be subject to mandatory arbitration, even assuming that the enforcement of the arbitration agreement would bar proceeding collectively. Like the FLSA, the ADEA expressly permits plaintiffs to bring collective actions. Last year, the Supreme Court relied on Gilmer in its decision in American Express Co. v. Italian Colors Restaurant to reject the claim that a waiver of class arbitration barred “effective vindication” of the plaintiffs’ federal statutory rights under the antitrust laws by removing their economic incentive to bring such claims.
The Eleventh Circuit found that, when read together, Gilmer and Italian Colors Restaurant show that the Supreme Court has “no qualms” about enforcing an arbitration agreement that would bar an employee’s right to proceed collectively. Walthour joins the growing body of cases upholding the use of class action waivers for a variety of employment claims. It will also assist financial services providers in enforcing class action waivers in their consumer arbitration agreements since Gilmer and Italian Colors Restaurant strongly support the use of such waivers in that context as well.