Mandatory Arbitration Agreements May Waive FLSA Collective Action Claims

Mandatory arbitration agreements between employers and employees have been a point of controversy during the past couple of decades.  While not all employers favor the potential benefits of arbitration, other companies have required their employees to enter into pre-dispute agreements to forego judicial litigation of claims and to commit to arbitration of any disputes.

The enforceability of those agreements have been regularly contested, particularly when the agreement has purported to eliminate any substantive or procedural employee rights.  As early as 1997, the Equal Employment Opportunity Commission (EEOC) issued a policy statement opposing the use of mandatory arbitration agreements. To enhance enforceability, employers have drafted these agreements not to limit statutorily-provided remedial relief or procedural rights, such as statute of limitations periods, or an employee’s right to file a claim with the EEOC or other federal or state agencies.

A rather recent drafting twist has consisted of employees agreeing to not arbitrate claims as or on behalf of a class of employees.  The enforceability of such a class waiver was contested before the United States Supreme Court in AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011), in which the Court upheld the class waiver in a consumer contract.  To the contrary, in early 2012, the National Labor Relations Board issued a decision denying enforcement of a class waiver in a Fair Labor Standards Act (FLSA) matter.  In re D.R. Horton, Inc., 357 NLRB No. 184, 2012 WL 36274 (Jan. 3, 2012).

Now, in a newly-issued opinion, the Eighth Circuit Court of Appeals distinguished the NLRB’s decision in D.R. Horton and has concluded that such class waivers are enforceable by an employer in an FLSA case.  Owen v. Bristol Care, Inc., No. 12-1719 (Jan. 7, 2013).  In doing so, the Eighth Circuit (which includes Minnesota) joined several other federal courts of appeal in reaching the same conclusion.

Takeaway:  Employers who prefer to arbitrate rather than judicially litigate employment disputes should consider drafting their mandatory arbitration agreements to include a provision by which employees agree to waive their right to arbitrate as or on behalf of a class, including collective actions under the FLSA.  Please let us know if we can assist you in drafting such language.

About Michael Miller

Michael is a Chambers-rated attorney in Briggs and Morgan's Employment, Benefits, and Labor group and is head of the firm’s Employment Law Counseling and Compliance practice group. He has 25 years experience counseling employers to prevent unwanted litigation and advises companies of ongoing changes in federal, state and local employment law. Michael advises employers in all areas of employment law including discipline and discharge, leaves of absence, wage and hour compliance, non-compete and confidentiality agreements, affirmative action plans, background checking, and drug/alcohol testing. For Michael's full bio, click here.

Posted on January 14, 2013, in Litigation, Wage and Hour. Bookmark the permalink. Leave a comment.

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