On Friday, March 21, 2014, the Eleventh Circuit affirmed the dismissal of an FLSA putative collective action and compelled two employees’ claims to arbitration on an individual basis pursuant to the terms of an arbitration agreement. The employees had argued that § 16(b) of the FLSA, which provides the mechanism for employees to pursue their claims on a class basis, creates a non-waivable substantive right to bring a collective action. The Eleventh Circuit rejected this argument and agreed with all Circuit Courts of Appeal that have previously considered the issue–including the Second, Fourth, Fifth, and Eighth Circuits–in concluding that the FLSA “does not provide for a non-waivable, substantive right to bring a collective action.” The decision, Walthour v. Chipio Windshield Repair, LLC, is a significant victory for employers who have an express class waiver provision in an arbitration agreement and desire to use it to avoid the threat of collective action certification under the FLSA.
At the outset of the plaintiffs’ employment, both employees signed arbitration agreements, voluntarily consenting that any disputes arising out of, or related to, their employment would be submitted to arbitration. The agreement also waived their right to proceed on a class or collective basis, stating, “employee and employer agree that each may bring claims against the other only in his/her/its individual capacity and not as a plaintiff or class member in any purported class or representative proceeding.”
Despite entering into this agreement, the employees filed a putative collective action in the U. S. District Court for the Northern District of Georgia alleging violations of the minimum wage and overtime provisions of the FLSA. The employees agreed that their dispute was covered by the terms of their arbitration agreement. They nevertheless argued that the class/collective action waiver provision of the agreement was unenforceable and thus that the arbitration agreements were invalid because the agreements attempted to waive a non-waivable, substantive right to a collective action.
Ruling in the employers’ favor, the court upheld the validity of the arbitration agreement in the FLSA context and enforced the collective action waiver provision. After an extensive examination of the FLSA’s legislative text, history, purpose, and prior court decisions, the court found that there was “no contrary congressional command” or “explicit provision” in the FLSA precluding enforcement of a class or collective action waiver which should override the clear mandates of the Federal Arbitration Act favoring arbitration.
The court discussed the Supreme Court’s decision in Gilmer v. Interstate/Johnson Lane Corp. in which the Supreme Court had found that the “right” to an opportunity to bring a collective action did not mean that Congress intended to bar individual lawsuits and that a governmental agency (the EEOC in that case) could still bring an action seeking class-wide relief.
In addition, the court discussed the Supreme Court’s recent decision in American Express Co. v. Italian Colors Restaurant at length, noting that the Supreme Court had found in that case that the waiver of class arbitration did not prohibit an individual from pursuing his or her own substantive rights under the statute.
This recent decision by the Eleventh Circuit is significant for employers utilizing express class action waivers in arbitration agreements as a means for avoiding the enormous burden of a possible class or collective action. This decision may prompt more frequent implementation of class waiver provisions in arbitration agreements by employers, but employers should consider the pros and cons of such an agreement before implementing one. Individual arbitration proceedings are not always better than a collective action in court.