Second Circuit Seal.jpgCo-authored by Robert S. Whitman, Patrick Bannon and Carlos Lopez

As we reported yesterday, in the recent oral argument in Raniere v. CitiGroup, Inc., the Second Circuit seemed skeptical of an argument that has been picking up steam among FLSA plaintiffs trying to block enforcement of agreements to arbitrate on an individual basis.  The plaintiffs argument has been: You can’t force me to resolve my FLSA claim through individual arbitration — that would deprive me of my substantive statutory right to file a collective action.

            There is no timetable for a decision in Raniere, but a new decision from the Second Circuit gives employers reason to be hopeful.

            Yesterday, in Parisi v. Goldman Sachs & Co., the Second Circuit rejected a similar argument in the context of a “pattern-or-practice” employment discrimination claim under Title VII.  The district court had refused to enforce an arbitration agreement that required individual, as opposed to class, arbitration.  According to the district court, the agreement was unenforceable because it would have deprived the plaintiff of the right to pursue a “pattern-or-practice” claim, a right the district court found to be substantive.  Under Title VII, employees may assert pattern-or-practice claims only in class actions. 

            The Second Circuit reversed.  A “pattern-or-practice” claim, it determined, is merely a procedural method for pursuing a Title VII claim — not a free-standing cause of action or substantive right.  In so holding, the court relied on its 2012 decision in Chin v. Port Authority of New York and a similar conclusion by the Fifth Circuit in a 2001 case.  Likewise, the court held, the right to assert a class action is a procedural right.  Because it is well established that parties to an arbitration agreement may voluntarily choose to waive procedural rights that would apply in court in favor of the informality and flexibility of arbitration, the Second Circuit concluded that there was no reason to deny enforcement of the agreement to individual arbitration. 

Parisi does not, of course, guarantee a similar result in Raniere.  Plaintiffs will undoubtedly try to identify differences between the right to assert a “pattern-or-practice” claim under Title VII and the right to file a collective action pursuant to the FLSA. 

The stakes in Raniere are high for employers with arbitration agreements permitting individual arbitration only and those hoping to implement such agreements in the near future.  If the Second Circuit enforces the agreement, employers will be one step closer to having a reliable tool for avoiding expensive collective action lawsuits.  If the court refuses enforcement, the flood of wage and hour lawsuits may only increase as employees (and their lawyers) circumvent arbitration agreements — at least in the Second Circuit and at least until the Supreme Court decides whether to weigh in.

The strong federal policy favoring arbitration coupled with Parisi’s rejection of employees’ “substantive right” theory in the Title VII context augers well for employers, but all they can do for now is wait.