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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