In most lawsuits filed under the Fair Labor Standards Act (FLSA), an employer’s ability to recover any attorney’s fees under the prevailing standard – that a plaintiff filed the case in “bad faith, vexatiously or wantonly” – is much too difficult to satisfy. A recent decision from the U.S. District Court for the Middle District of Florida, however, provides an avenue for recovery of such fees – at least in part. Aralar v. Scott-McRae Automotive Group, LLLP, 2018 U.S. Dist. LEXIS 64045 (M.D. Fla. Apr. 17, 2018).
In Aralar, the plaintiff filed suit in federal court, claiming that his employer had improperly classified his automotive service advisor job as exempt and that as a result he was entitled to overtime pay and other damages under the FLSA. However, as a condition of his employment the plaintiff had signed an arbitration agreement, one provision of which was the following:
If a party who has agreed to arbitrate claims under this procedure files or causes to be filed in court or state agency a complaint alleging a claim or cause of action which is subject to arbitration under this procedure, the defendant/respondent will notify the party or the party’s attorney of the existence of the Arbitration Agreement, and request that the case be dismissed or stayed. If the party does not move to dismiss or stay the action within 10 calendar days of service, and the defendant/respondent successfully moves to dismiss or stay the case and refer it to arbitration, the defendant/respondent may submit a request for payment of fees and costs to the Arbitrator, who shall award to the defendant/respondent and against the party the defendant/respondent’s reasonable costs and attorneys [sic] fees incurred because of the filing of the complaint.
After the plaintiff filed his judicial complaint, the employer gave notice of the arbitration agreement under this provision, yet the plaintiff took no action to stay or dismiss his lawsuit. The district court subsequently stayed the case pending arbitration and ultimately the arbitrator dismissed the plaintiff’s claims, finding that his job was properly classified as exempt (a decision that pre-dates, yet conforms with, the Supreme Court’s recent ruling on the exempt status of automotive service advisors, discussed here). The employer then sought, and the arbitrator awarded, attorney’s fees and costs of nearly $20,000 stemming from the plaintiff’s failure or refusal to dismiss his lawsuit, as provided for in the above provision. The employer moved the district court to confirm the attorney’s fees award, while the plaintiff moved to have the award vacated. Citing Fox v. Vice, 563 U.S. 826 (2011) and Christiansburg Garment Co. v. EEOC, 434 U.S. 412 (1978), the plaintiff claimed that because his claims were not frivolous, there was a per se rule against awarding fees to the employer. The district court disagreed, noting that these cases addressed the awarding of fees in Title VII and other civil rights cases, not FLSA cases. The court rejected the plaintiff’s additional arguments for vacating the award, noting that none of them addressed the only available grounds currently existing to do so: procurement through corruption, fraud or undue influence by a party; partiality or corruption by the arbitrator; an arbitrator’s refusal to hear evidence or other misconduct; or where the arbitrator exceeded his or her powers.
In short, concluded the court, the parties signed a contract and the plaintiff did not honor it. As a result, the district court had very limited grounds to disturb the arbitration award and found no such grounds in this case. For an area of law in which any attorney’s fees are nearly impossible to collect for defendant employers, this case provides useful guidance for employers who have implemented, or are considering implementing, arbitration programs. From a practical perspective, prevailing employers likely will not be able to collect all of their fees against plaintiffs in FLSA cases but, at a minimum, use of a provision such as the one in this case, albeit limited in the extent of fees and costs potentially recoverable, may provide significant leverage for negotiation and ultimate resolution of FLSA claims.