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Arbitration Agreements Waiving Employees' Rights to Class & Collective Actions are Enforceable

Posted on Tue, Apr 22, 2014 @ 09:27 AM

by Jack B. HarrisonJack B. Harrison

On March 21, 2014, the U.S. Court of Appeals for the Eleventh Circuit, in Walthour v. Chipio Windshield Repair, LLC, et al., joined four other Circuit Courts of Appeals in holding that an arbitration agreement that waives the right of an employee to bring a class or collective action under the Fair Labor Standards Act (“FLSA”) is enforceable.  In so holding, the Eleventh Circuit joined the Second, Fourth, Fifth, and Eighth Circuits in giving employers support regarding the enforceability of class and collective action waivers.

In Walthour, the employees had signed arbitration agreements with their employer, under which they agreed to arbitrate all claims arising out of their employment and to pursue claims only individually, rather than collectively or as a class.  Additionally, the agreement at issue specifically waived the ability of the employees to bring a class action in the arbitration context.   However, even in the face of the agreement, once the employees’ employment ended, the employees brought a collective action against the employer under the FLSA.  In this lawsuit, the employees alleged that the employer failed to pay them the required minimum wage and overtime and failed to maintain records required by the FLSA.  The employer then filed a motion to compel arbitration based on the agreement that the employees had signed.  The federal district court granted the motion, a decision that was then appealed to the Court of Appeals.

After reviewing the language of the FLSA, its legislative history, and Supreme Court precedents interpreting the FLSA, the Court of Appeals dismissed the argument made by the employees that the right to bring a collective action under the FLSA is a non-waivable substantive right, concluding that there was no “congressional command” under which the FLSA had overridden the requirement of the Federal Arbitration Act (“FAA”) that collective action waivers in arbitration agreements were to be enforced.

Based on the FAA’s “liberal federal policy favoring arbitration agreements,” the Court of Appeals concluded that the agreements in question were enforceable under the FAA.  Based on multiple Supreme Court precedents (American Express Co. v. Italian Colors Rest. (2013); AT&T Mobility LLC v. Concepcion (2011); Gilmer v. Interstate/Johnson Lane Corp. (1991)), the Court of Appeals concluded that it was compelled to “rigorously enforce arbitration agreements according to their terms.” (quoting American Express Co. v. Italian Colors Rest.).

The importance of this decision for employers is that the Eleventh Circuit's decision in Walthour is consistent with decisions by other Courts of Appeals and with recent Supreme Court decisions regarding the enforceability of arbitration agreements that include waivers of class and collective actions by employees.  However, prudent employers should note that the NLRB continues to take the position that waivers such as this violate the rights of employees to engage in protected activity in concert under the National Labor Relations Act.  As a result, the NLRB continues to bring charges for unfair labor practice against employers that include class and collective action waivers in their arbitration agreements.

Tags: FLSA, US Court of Appeals, Federal Arbitration Act, NLRB

Attempts to Shorten Limitations for FLSA Claims Rejected

Posted on Mon, Aug 26, 2013 @ 06:43 AM

Jack B. Harrisonby Jack B. Harrison

United States Court of Appeals for the Sixth Circuit Rejects Attempts by Employers to Shorten the Limitations Period for Claims Under the Fair Labor Standards Act Through Employment Agreements

On August 6, 2013, the United States Court of Appeals for the Sixth Circuit issued a decision in Boaz v. FedEx Customer Information Services, Inc., in which the Court held that the inclusion of language in an employment agreement designed to shorten to six months the statute of limitations for bringing an employment claim did not waive the employee’s rights under the Fair Labor Standards Act (FLSA).

In Boaz, the plaintiff, Margaret Boaz, was employed by FedEx beginning in 1997.  The employment agreement that Ms. Boaz signed included the following language:

To the extent the law allows an employee to bring legal action against Federal Express Corporation, I agree to bring that complaint within the time prescribed by law or 6 months from the date of the event forming the basis of my lawsuit, whichever expires first.

In April, 2009, Ms. Boaz sued FedEx under the FLSA and the Equal Pay Act, a provision of the FLSA.  Ms. Boaz’s claims were based on allegations that, from January 2004 through June 2008, FedEx had paid her less than it had paid the male employee who previously held her position and who had performed the same duties.  Ms. Boaz claimed that these actions by FedEx violated the Equal Pay Act.  Additionally, Ms. Boaz claimed that FedEx had violated the FLSA by failing to pay her required overtime.

While Ms. Boaz’s claims under the FLSA were filed within the statute of limitations set forth in the FLSA (two years for non-willful violations and three years for willful violations), FedEx argued, in filing for summary judgment, that the six month statute of limitations contained in the employment agreement controlled.  FedEx asserted that the last illegal activity alleged in Ms. Boaz’s claim was the issuance of Ms. Boaz’s June 30, 2008 paycheck.  Because this occurred more than six months before Ms. Boaz filed suit, FedEx claimed that her FLSA claims were time barred under the terms of her employment agreement.  The district court held that the employment agreement superseded the statutory statute of limitations and dismissed Ms. Boaz’s claims as time barred.

On appeal, the United States Court of Appeals for the Sixth Circuit reversed the decision of the district court.  The Court of Appeals determined that the Supreme Court had previously held in Brooklyn Savs. Bank v. O’Neil, 324 U.S. 697, 706–10 (1945), that employees could not waive their rights under the FLSA by contract.  In O’Neil, the Supreme Court had held that allowing such waivers would “nullify” the purpose of the FLSA of “achiev[ing] a uniform national policy of guaranteeing compensation for all work or employment engaged in by employees covered by the Act.”  Id. at 707.  In its decision, the Court of Appeals rejected FedEx argument that it could contractually shorten the limitations period for FLSA claims because courts previously have allowed employers to contractually shorten the limitations period for claims under Title VII of the Civil Rights Act of 1964.  The Court of Appeals rejected this argument by analogy, pointing out that the Supreme Court had already articulated the difference between claims under the FLSA and Title VII in Alexander v. Gardner-Denver Co., 415 U.S. 36, 52 (1974), as related to an employee’s waiver of rights.  According to the Supreme Court, an employer does not gain a competitive advantage by requiring employees to contractually waive rights under Title VII, but does gain such a competitive advantage by requiring the waiver of rights under the FLSA, in that such a waiver may allow an employer to pay less than minimum wage to its employees.

The decision in Boaz certainly does not eliminate advantages that may be gained by the inclusion of language in employment agreements that shorten the statute of limitations for employment claims.  In some cases, such as in the case of Title VII claims, such language may well be enforceable.  However, Boaz does point out the limits of such language in employment agreements.  Based on Boaz, prudent employers must understand that contractual language shortening the statute of limitations for employment claims is likely to be unenforceable as related to claims under the FLSA and/or the Equal Pay Act.  In those cases, if the employee’s claim is brought within the statutory statute of limitations, the employer must prepare to defend the claim.

 

Tags: 6th Circuit Court, FLSA