In all the hoopla over the Supreme Court’s Hobby Lobby decision last week, it may have been lost that the Court refused to review a circuit court decision compelling arbitration in a collective action under the Fair Labor Standards Act.
All federal courts of appeal to decide the issue so far have found that an employee may waive his or her right to bring an FLSA collective action in court through a valid arbitration agreement. That would include the Second, Fourth, Fifth, Eighth, and Eleventh Circuits. (For a listing of the states governed by these circuits, please go to the jump at the bottom of this page.)
In Walthour v. Chipio Windshield Repair, LLC, the decision that the Supreme Court declined to review, the plaintiffs alleged failure to pay minimum wage, overtime, and FLSA recordkeeping violations. The employers moved to compel arbitration, citing mandatory arbitration agreements that the plaintiffs had signed shortly after they were hired. The agreements specified that all employment disputes, including class claims, were to be resolved exclusively through individual arbitration. A federal district court in Georgia granted the employers’ motion and dismissed the lawsuit. The plaintiffs appealed to the U.S. Court of Appeals for the Eleventh Circuit, which affirmed the dismissal.
The plaintiffs then asked the U.S. Supreme Court to review the 11th Circuit decision, and last week the Court declined. This doesn’t necessarily mean that the Supreme Court agrees with the 11th Circuit, but it does mean that the decision stands for the time being. So far, every federal appeals court to address the issue has found that the FLSA does not provide a non-waivable, substantive right to bring a collective action.
Employers who want to ensure that they can arbitrate FLSA collective and other claims should consider adopting the following:
- An internal complaint process, including a toll-free hotline, with a “no-retaliation” promise
- Multiple channels for employees to make complaints, published in the employee handbook and in other conspicuous places throughout your facilities
- Training for employees on the complaint process and how to use it
- An arbitration agreement that complies with the law and covers class and collective claims, using arbitrators from AAA or another respected source.
Although arbitration is no panacea, it is generally faster and more efficient than litigation in court. Moreover, a recent study by Cornell University on arbitration of discrimination claims indicated that plaintiffs were successful about 36 percent of the time in court, but only about 21 percent of the time in arbitration, and the plaintiffs who won in arbitration won smaller awards than they did in court. It’s possible that the win-loss results in arbitration of FLSA cases might be similarly employer-friendly. (On the other hand, there may not be much difference in the damages awarded because the FLSA does not provide for recovery of compensatory and punitive damages.)
To see which federal circuit court of appeals covers which states, read on.
The U.S. Courts of Appeal hear appeals from federal courts in their designated states.
Second Circuit: Connecticut, New York, Vermont
Fourth Circuit: Maryland, North Carolina, South Carolina, Virginia, West Virginia
Fifth Circuit: Louisiana, Mississippi, Texas
Eighth Circuit: Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, South Dakota
Eleventh Circuit: Alabama, Florida, Georgia