The Supreme Court announced this week that it has granted review in American Express Co. v. Italian Colors Restaurant. The case could have an important impact on whether courts may decline to enforce an employee’s express agreement to arbitrate all employment claims on an individualized basis, waiving class arbitration procedures, and nevertheless permit pursuit of FLSA or other wage and hour claims on a class or collective basis in arbitration or in court.
The AmEx case arose when a restaurant filed a federal antitrust class action complaint against American Express in federal court. American Express moved to compel arbitration of the restaurant’s claim on an individual basis, based on an arbitration clause that included a waiver of class arbitration. The district court enforced the agreement but the Second Circuit reversed. Over the objections of four judges who favored en banc review, the Second Circuit held that, where the cost for an individual of vindicating a federal statutory right outweighs the single claimant’s potential recovery, the claimant cannot be compelled to arbitrate the claim on an individual basis.
The Supreme Court will now consider whether the Second Circuit’s decision is consistent with AT&T Mobility LLC v. Concepcion, where the Supreme Court held that California’s refusal to enforce arbitration agreements on similar grounds was preempted by the Federal Arbitration Act. See Petition for Writ of Certiorari, Opposition to Petition, and Reply in Support of Petition. The precise question the Supreme Court has agreed to decide in AmEx is: “Whether the Federal Arbitration Act permits courts, invoking the ‘federal substantive law of arbitrability,’ to invalidate arbitration agreements on the ground that they do not permit class arbitration of a federal law claim.”
A decision in AmEx is likely to be important for wage and hour cases because some plaintiffs have argued that it is not economical to pursue FLSA claims on an individual basis and that it would therefore violate public policy to enforce an arbitration clause that included a waiver of class arbitration procedures. There are certainly differences between the federal antitrust claims at issue in AmEx and FLSA claims. Plaintiffs often need expensive economic experts in antitrust cases while FLSA violations can often be shown without experts. Also, the FLSA includes Section 216(b), authorizing collective actions, whereas the federal antitrust laws (to our knowledge) do not themselves provide for non-individual claims. But despite these differences, a decision in AmEx could either breathe new life into this line of attack on waivers of class arbitration procedures or put the argument to rest for good.