By: John Phillips and Steve Shardonofsky

Seyfarth Synopsis:  In a must-read decision and case of first impression at the federal appellate level, the Fifth Circuit Court of Appeals held late last week that a district court may not approve sending notice of an FLSA collective action to employees who had agreed to arbitrate employment claims.  This decision may curtail an alarming tactic in FLSA litigation in which plaintiffs’ counsel use the collective-action conditional certification procedure (1) to send notice to large numbers of potential opt-in plaintiffs inviting them to join the lawsuit as plaintiffs even though they had previously agreed to arbitrate their claims on an individual basis and not to participate in court in a class or collective action; and then (2) using the information gathered from the notice process, to submit (or threaten to submit) hundreds or even thousands of individual arbitration claims against the company.

Arbitration agreements with class and collective action waivers (recently approved by the U.S. Supreme Court in its landmark Epic Systems decision) have helped employers manage large-scale litigation risks, including wage-hour collective actions, while at the same time providing a fair and relatively expeditious forum for aggrieved employees.  But what happens when an employee, who has not signed the company’s arbitration agreement, brings an FLSA collective action and seeks to conditionally certify and send notice to a large group of employees, the vast majority of whom are bound by such an agreement?  May a court conditionally certify a collective and allow notice of the lawsuit to be sent to the larger group of current and former employees, including those who signed an arbitration agreement?

In recent years, some district courts have allowed plaintiffs to send notice to the entire group of employees, including those who agreed to arbitration and agreed not to participate in class or collective actions.  In 2017, for example, a federal district court in Tennessee authorized notice of an FLSA lawsuit to approximately 80,000 current and former employees, even though at least 50,000 of them had agreed to arbitrate their employment claims.  Although decisions on FLSA conditional certification are typically not immediately reviewable by an appellate court, the employer in that case sought an immediate appeal under a provision in the Federal Arbitration Act that allows an interlocutory appeal after the denial of a motion to compel arbitration.  The Sixth Circuit Court of Appeals declined to overturn the district court’s decision, however, reasoning that it did not have jurisdiction to take the appeal because the district court had not declined to enforce an arbitration agreement (but had instead granted the plaintiffs’ motion for conditional certification).  Because the Sixth Circuit could not decide the issue on the merits, the district court’s ruling was allowed to stand.

The Fifth Circuit Steps In

In a key decision for employers with arbitration programs, the Fifth Circuit Court of Appeals held late last week in In re: JPMorgan Chase & Company that district courts should not send collective-action notices to current or former employees who agreed to arbitrate their employment claims.  The Fifth Circuit’s decision (a case of first impression for the federal appellate courts) is a must-read for all wage-hour practitioners and employers with mandatory arbitration programs.

Case Background

In December 2017, several call-center employees at JPMorgan Chase sued the bank, asserting that Chase failed to pay them for all overtime owed.  The plaintiffs brought their lawsuit as a collective action under the FLSA and sought to represent a group of approximately 42,000 current and former employees.  More than 85 percent of those employees (about 35,000) had signed arbitration agreements with the bank, however, requiring them to arbitrate any employment claims on an individual basis instead of going to court.

The plaintiffs asked the district court to conditionally certify the case and grant plaintiffs permission to send notice of the lawsuit to the entire group of 42,000 current and former employees.  Chase opposed this, arguing in part that sending notice to the entire group was improper because a vast majority of them had agreed to arbitrate their claims individually and were, therefore, not eligible to participate in the lawsuit.  The district court reasoned that, even if Chase was correct, until the arbitration-bound employees joined the case and Chase moved to compel arbitration against specific individual, the court could not definitively ascertain whether any of the agreements were, in fact, enforceable.  Because Chase had not moved to compel arbitration, the district court ordered that notice be sent to the entire group of 42,000 and ordered Chase to produce contact information (including names, and physical and e-mail addresses) for each individual.  After the district court declined to grant an interlocutory appeal, Chase filed a mandamus petition with the Fifth Circuit.

The Fifth Circuit’s Decision

The Fifth Circuit overturned the district court’s decision to send notice to the entire group of workers, holding “that district courts may not send notice to an employee with a valid arbitration agreement unless that record shows that nothing in the agreement would prohibit that employee from participating in the collective action.”  Whose burden is it to meet this threshold?

According to the Fifth Circuit, if there is a genuine dispute as to the existence or validity of an arbitration agreement, the employer has the burden to show (by a preponderance of the evidence) the existence of a valid arbitration agreement as to any particular employee.  In such circumstances, district courts should allow the parties to submit additional evidence “carefully limited to the disputed facts” to resolve the issues.  Only if the employer fails to meet this burden should the employee receive the same notice as others.  The Fifth Circuit sent the case back to the district court to address these issues in the first instance.

Along the way, the Fifth Circuit recognized the dearth of authority guiding district courts on these important issues, highlighted that this was the first appellate ruling on point, and also made the following important observations:

  • Whether to send collective action notice to employees who signed arbitration agreement is an “increasingly recurring issue” that has resulted in divergent outcomes at the district court level. The Court noted it was deciding the issue to “settle a new and important problem.”
  • Hoffmann-La Roche Inc. v. Sperling, 493 U.S. 165 (1989), the seminal Supreme Court decision on the conditional certification notice process, does not grant employees a right to receive notice of potential FLSA claims (as some courts have held in this context) and “does not give district courts discretion to . . . require notice of a pending FLSA collective action to employees who are unable to join the action because of binding arbitration agreements.”
  • Sending notice to employees with valid arbitration agreements “merely stirs up litigation,” which “Hoffmann-La Roche flatly proscribes.” It also undermines the “efficient resolution in one proceeding of common issues,” the fundamental purpose of facilitating the notice process.


This is an important decision for employers with mandatory arbitration programs, especially those in the Fifth Circuit.  It removes the plaintiffs’ most effective weapon in FLSA lawsuits following the landmark Epic Systems ruling: using the conditional certification process to obtain contact information for and send notice of the lawsuit to large numbers of potential opt-in plaintiffs (even those who agreed to arbitrate their claims), and then using the information gathered to submit (or threaten to submit) hundreds or even thousands of individual arbitration claims, resulting in “death by a thousand cuts.”

Nevertheless, the Fifth Circuit’s ruling still left some important questions unanswered: When should the parties and the district court delve into these issues—during the briefing on conditional certification or after the court rules that notice should go out? How do plaintiffs establish a genuine dispute as to the existence or validity of an arbitration agreement without a mechanism for obtaining the arbitration agreements for the entire putative collective?  How will any evidentiary issues be addressed efficiently in cases involving hundreds or thousands of potential plaintiffs?  Should the district courts undertake in camera review of arbitration agreements or lists of employees with arbitration agreement to prevent plaintiffs’ counsel from obtaining those names?  Do defendants have an obligation to meet their burden for each individual in the putative collective who have an arbitration agreement?

While defeating conditional certification will continue to be a key focus for employers in FLSA cases, given all of these outstanding questions, employers and defense-side practitioners should be ready from the outset with a clear strategy to compel arbitration and, if necessary, to assemble and muster evidence to establish the existence of a valid arbitration agreement as to any particular employee at issue.