The Eleventh Circuit recently held that an arbitration agreement that waives an employee's ability to bring a collective action under the Fair Labor Standards Act (FLSA) is enforceable under the Federal Arbitration Act (FAA).
Executive Summary: The Eleventh Circuit recently held that an arbitration agreement that waives an employee's ability to bring a collective action under the Fair Labor Standards Act (FLSA) is enforceable under the Federal Arbitration Act (FAA). See Walthour v. Chipio Windshield Repair, LLC (11th Cir. March 21, 2014). The court rejected the plaintiffs' argument that the right to file a collective action under the FLSA is a non-waivable substantive right and that the agreement was invalid because it purported to waive that right. The court found no contrary congressional command in the FLSA that would override the FAA's strong policy in favor of arbitration.
Background
The plaintiffs entered into arbitration agreements with their employer, in which they agreed to arbitrate all claims arising out of their employment and to only pursue claims individually, not as a class. The agreement specifically waived the employees' ability to bring a class action in arbitration, and stated that they would not bring a claim as a plaintiff or class member in any class or representative proceeding.
Despite this language, after their employment ended, the plaintiffs brought a collective action against the employer under the FLSA, claiming the employer failed to pay them the required minimum wage and overtime and failed to maintain records required by the FLSA.
A federal trial court granted the employer's motion to compel arbitration, and the Eleventh Circuit affirmed this decision.
FAA's Policy in Favor of Arbitration
The Eleventh Circuit found the agreements enforceable under the FAA, in light of the FAA's "liberal federal policy favoring arbitration agreements." The court explained that Supreme Court precedent requires courts to "rigorously enforce arbitration agreements according to their terms." (quoting American Express Co. v. Italian Colors Rest. (2013)). Further, the court noted that the "overarching purpose of the FAA . . . is to ensure the enforcement of arbitration agreements according to their terms so as to facilitate streamlined proceedings." (quoting the Supreme Court's decision in AT&T Mobility LLC v. Concepcion (2011)). Thus, since there was no dispute that the plaintiffs' FLSA claims fell within the scope of the arbitration agreements, the court held that "the FAA standing alone, requires enforcement of the Arbitration Agreements according to their terms, which, in this case, means individual, not collective, arbitration."
No Contrary Congressional Command
The court also rejected the plaintiffs' argument that the right to bring a collective action under the FLSA is a non-waivable substantive right and that the FLSA has overridden the FAA's requirement that collective action waivers in arbitration agreements be enforced. The court acknowledged that the FAA's requirement that arbitration agreements be enforced according to their terms may be overridden by a "contrary congressional command." However, citing the Fifth Circuit's decision in D.R. Horton, Inc. v. NLRB, the court noted, "[i]n every case the Supreme Court has considered involving a statutory right that does not explicitly preclude arbitration, it has upheld the application of the FAA." (For more information on the Fifth Circuit's decision in D.R. Horton, please see our Legal Alert Fifth Circuit Further Strengthens Class Action Waivers with Latest DR Horton Decision.)
After examining the statutory text of the FLSA, as well as its legislative history and purposes, and Supreme Court decisions addressing the enforceability of arbitration agreements, the Eleventh Circuit could discern "no contrary congressional command" that precluded the enforcement of the plaintiffs' arbitration agreements and their collective action waivers.
First, the court held that the FLSA contains no explicit provision precluding arbitration or a waiver of the right to a collective action under § 16(b). Next, the court held that, based on the Supreme Court's decision in Gilmer v. Interstate/Johnson Lane Corp., as interpreted by Italian Colors Restaurant, "the text of FLSA § 16(b) does not set forth a non-waivable substantive right to a collective action." The court noted that all of the federal appeals courts to have examined the issue have determined that § 16 does not provide for a non-waivable, substantive right to bring a collective action. The court agreed with the Eighth Circuit's decision in Owens v. Bristol Care, Inc. that, even if Congress intended to create a "right" to class actions under the FLSA, "if an employee must affirmatively opt into any such class action, surely the employee has the power to waive participation in a class action as well."
Additionally, the court rejected the plaintiffs' argument that it was significant that Congress provided for the procedural right to a collective action in the text of the FLSA instead of leaving it to the Federal Rules of Civil Procedure. "Congress's decision to specifically include the procedural right to a collective action in the FLSA does not somehow transform that procedural right into a substantive right." The court held that rather than expanding a plaintiff's substantive right, the decision to include the collective action provision actually limited a plaintiff's existing procedural rights as set forth in Rule 23, since a plaintiff could bring a class action under the FLSA without the prior consent of similarly situated employees if Congress had not included § 16(b).
Finally, the court found nothing in the FLSA's legislative history to show that Congress intended collective actions to be essential to the effective vindication of the FLSA's rights. The court held that the enforcement of collective action waivers in arbitration agreements is not inconsistent with the FLSA. Thus, in the absence of a contrary congressional command in the FLSA, the court found that the plaintiffs' arbitration agreements were enforceable, including the collective action waivers.
Employers' Bottom Line:
The Eleventh Circuit's decision is in accordance with recent Supreme Court decisions upholding the enforceability of arbitration agreements that include class action waivers. The NLRB, however, continues to prosecute unfair labor practice charges against employers that implement arbitration agreements with class action waivers. The NLRB's position is that such waivers violate employees' rights to engage in protected concerted activity under the National Labor Relations Act.
If you have any questions regarding the court's decision or other issues relating to the enforceability of arbitration agreements, please contact Bennet Alsher, balsher@fordharrison.com, who is a partner in our Atlanta office. You may also contact the FordHarrison attorney with whom you usually work.