What’s one way to derail a potentially large collective action about Fair Labor Standards Act violations? To implement a new arbitration policy within days, thereby ensuring that your current employees cannot join the court case. At least, that was the successful tactic used by a Chicago restaurant recently.
In Conners v. Gusano’s Chicago Style Pizzeria, __ F.3d __, 2015 WL 1003860 (8th Cir. Mar. 9, 2015), a former server alleged the restaurant where she had worked violated the FLSA. She planned to represent other current and former servers at the restaurant. However, a month later, the restaurant rolled out a new arbitration agreement for employees (but gave them the option of opting out as well, and explicitly explained that the agreement prevented the employee from joining the Conners action). The plaintiffs (the original woman and other former servers who had already opted in), asked the court to enjoin the restaurant from using its new arbitration agreement to reduce the number of potential plaintiffs. The district court granted the plaintiffs’ motion “to prevent a chilling effect on future collection actions under the [FLSA],” and enjoined the restaurant from enforcing the arbitration agreement against anyone who wanted to become a plaintiff in the action.
The Eighth Circuit reversed. It found that the plaintiffs “lacked standing to challenge the current employees’ arbitration agreement,” which deprived the district court of jurisdiction to enjoin enforcement of the new arbitration agreement. Critically, the court did not buy the argument that the new arbitration agreement caused plaintiffs to suffer a “concrete and particularized injury” in the form of an increased pro rata share of litigation expenses. The court faulted plaintiffs for failing to provide any evidence that the current employees were going to join the lawsuit, even without an arbitration agreement. It noted that at the time the motion was filed, no current employees had joined the collective action, and the plaintiffs’ counsel could offer nothing other than “a hopeful guess” that current employees would eventually join the cause.
In short, the court concluded that “one must resort to pure speculation to conclude the former employees’ portion of the litigation costs is any greater than it would have been absent the agreement. This does not satisfy Article III.”
The problem with this decision is that it feels impractical to expect plaintiffs, whose lawsuit is just a few weeks old, to already have evidence available of what classes of employees will opt in to the collective action. In short, if other circuits adopt this approach, this tactic could be an effective way to reduce the size of new class or collective actions whose representative is a former employee.