Eight Circuit Seal.jpgAuthored By Patrick J. Bannon

Can an employee waive the right to pursue an FLSA overtime claim on a collective or class basis?  On January 7, 2013, another federal appellate court, the 8th Circuit Court of Appeals, answered “Yes.”  A link to the Court’s opinion is here.  The United States Courts of Appeals for the 3rd, 4th, 5th, 9th and 11th — and now the 8th — Circuits have all rejected employee challenges to agreements to arbitrate FLSA claims on an individual basis.

The most recent victory for individual arbitration of FLSA claims, Owen v. Bristol Care, involved an arbitration agreement between Bristol Care, an elder care business, and Owen, one of its employees.  Owen and Bristol Care agreed to arbitrate “all claims or controversies” against each other, specifically including FLSA claims.  They also agreed that they would not arbitrate covered claims “as, or on behalf of, a class.”

Two years after entering into the arbitration agreement, Owen filed suit in federal court, claiming that she was misclassified as exempt and consequently denied overtime in violation of the FLSA.  Pursuant to FLSA Section 216(b), she sought to pursue the suit as a collective action on her own behalf and on behalf of other similarly situated employees.  Bristol Care filed a motion to stay the action and to compel arbitration, based on Owen’s arbitration agreement.

The District Court denied Bristol Care’s motion, finding that the provision precluding arbitration “on behalf of, a class” invalidated Owen’s arbitration agreement.  A waiver of the right to pursue FLSA claims on a class basis, the District Court held, is inconsistent with Section 216(b) of the FLSA, which gives employees the right to bring actions on behalf of others, and with the National Labor Relations Act, which, according to the National Labor Relations Board’s controversial D.R. Horton decision, guarantees employees the right to participate in class actions as a form of statutorily protected “concerted activity.”

A unanimous 8th Circuit panel issued a terse opinion overruling the District Court.  The existence of a right to bring a collective action under Section 216(b) of the FLSA, the Court pointed out, does not mean that an employee cannot waive the exercise of that right.  Indeed, the Court noted, the requirement that an employee affirmatively opt in to a Section 216(b) action suggests that an employee can waive the right to participate in such an action.

The appellate panel also rejected the argument that enforcing arbitration agreements precluding class arbitration would thwart Congress’s intent in enacting the FLSA.  Owen retained the ability to vindicate her rights under the FLSA through individual arbitration, the Court noted, as well as the right to file a complaint with the Department of Labor, and the Department of Labor has the power to investigate and file suit on behalf of a class of employees.

As for the argument that the agreement not to arbitrate on a class basis violated employees’ rights under the NLRA to engage in concerted activity, the Court declined to follow the NLRB’s D.R. Horton decision, emphasizing that the decision is non-binding and has been widely rejected by the courts.  Based on the strong federal policy of enforcing arbitration agreements as written, the 8th Circuit directed the District Court to enter an order staying the court proceedings and compelling arbitration.

Bristol Care marks the sixth federal appellate court to validate agreements to arbitrate FLSA claims that explicitly preclude “class arbitration” procedures.  No federal appellate court has held that such agreements are unenforceable.  While plaintiff-side lawyers still have not given up challenging these agreements, the legal tide continues to run in favor of enforcing agreements to arbitrate on an individual basis.