Castellanos and fellow employees (plaintiffs) brought a putative class action against their employer Raymours, alleging violations of the Fair Labor Standards Act (FLSA). All plaintiffs were bound by an Employee Arbitration Program, which required arbitration of any employment or compensation related claim. The EAP established a 180-day statute of limitations (SOL) for asserting a claim; contained a class action waiver; and included a provision that disputes about enforceability were for a court to decide. Raymours moved to compel arbitration, strike the class allegations and dismiss the complaint. Plaintiffs opposed the motions, asserting that the SOL provision was unenforceable and should be severed.
The United States District Court, Eastern District in New York granted the motion in part and denied the motion in part. Having determined that the SOL argument concerned enforceability rather than procedure and was in the purview of the Court, the Court found the SOL period unenforceable. The FAA’s mandate to enforce arbitration agreements according to their terms holds true for claims that allege a violation of a federal statute unless it has been overridden by a “’contrary congressional command.’” The EAP’s SOL did just that. The FLSA is a uniquely protected statute with a two-tiered SOL – 2 years to bring a claim and 3 years if the violation is willful. The EAP’s SOL eliminated this intended distinction. By limiting the time frame, the EAP SOL also limited plaintiffs’ recovery since plaintiffs may recover damages as far back as the SOL reaches under the FLSA. The Court found that the EAP’s SOL operated as a waiver of the plaintiffs’ rights to pursue the full amount of damages provided by the FLSA and severed the provision. Given the clear class action waiver in the EAP, the Court struck the class allegations and stayed the action while pending arbitration of the individual claims.