As I reported earlier1, the U.S. Supreme Court held in Epic Systems Corp. v. Lewis on May 21, 2018, that employers and employees can agree in arbitration agreements that claims be brought on an individual, rather than class or collective basis. Now, the U.S. Court of Appeals for the Sixth Circuit has held that the Epic ruling extends to claims brought under the Fair Labor Standards Act (FLSA).
In Gaffers v. Kelly Services, Inc., the plaintiff worked in a “virtual call center” – essentially, a call center operation where the employees work from home – and claimed that the employer had underpaid him and his fellow “virtual” employees. The plaintiff brought suit against his employer under the FLSA on behalf of himself and his coworkers as an FLSA collective action. More than 1,600 employees joined him in the case. About half of those employees, however, had signed arbitration agreements with the employer in which they agreed that individual arbitration is the only forum for any employment claims, including wage claims. When the employer moved to compel individual arbitrations of those employees’ claims, the plaintiff argued that the National Labor Relations Act (NLRA) and the FLSA rendered those arbitration agreements unenforceable.
The Sixth Circuit shot down the plaintiffs’ argument. Relying on the Supreme Court’s decision in Epic, the court explained that neither the NLRA nor the FLSA displace the Federal Arbitration Act (FAA), which demonstrates a strong federal policy in favor of arbitration. Although the NLRA gives employees the right to concerted activity, and the FLSA gives employees the right to bring wage claims in collective actions, neither law shows a “clear and manifest” congressional intention to create exceptions to the FAA or to invalidate individual arbitration agreements. When employers and employees agree in an arbitration agreement to submit all claims to arbitration on an individual basis, therefore, the employee cannot bring an FLSA collective action.
The Sixth Circuit’s application in the Epic ruling to FLSA claims is another reminder to employers to review their arbitration agreements with their employees or, if they do not have arbitration agreements with their employees, to consider making such agreements. Arbitration of employment claims offers several advantages over litigation.