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Arbitration Agreements Containing FLSA Class Waivers Held Enforceable

Arbitration agreements containing class waivers are enforceable in claims brought under the FLSA, the Eighth Circuit held this week in Owen v. Bristol Care. The district court previously had found that an agreement which prohibited employees from arbitrating FLSA cases on behalf of a class was unenforceable based largely on the NLRB’s recent decision in D.R. Horton.  In D.R. Horton, the NLRB held a class waiver unenforceable in a similar FLSA challenge based on the agency’s conclusion that the waiver conflicted with the employees’ Section 7 rights to engage in protected concerted activity.  The Eighth Circuit distinguished D.R. Horton and reversed.  First, the court noted that the NLRB limited its holding to arbitration agreements barring allprotected concerted action, whereas the agreement at issue did not bar an employee from filing a complaint with the Department of Labor.  Second, the appellate court observed that nothing in the agreement precluded any administrative agency, such as the DOL, from investigating and, if necessary, filing suit on behalf of a class of employees.  Third, the court noted that D.R. Horton conflicted with the Supreme Court decision in Concepcion and most federal appellate decisions on the issue.

Nevertheless, this issue is far from settled. The U.S. Supreme Court is scheduled to hear argument next month in the case of American Express Co. v. Italian Colors Restaurant, to address the issue of whether the Federal Arbitration Act permits courts to invalidate arbitration agreements on the ground that they do not permit class arbitration of a federal law claim. Although Italian Colors does not involve FLSA claims, it may have an impact on the reasoning in Owen v. Bristol Care.  The D.R. Horton case is also pending on appeal before the Fifth Circuit, with oral argument scheduled for February 5, 2013.

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As the U.S. labor market continues to evolve over the coming decades, adapting to three major trends will be vital for employers. First, changing workforce demographics, size and focus will become a key issue in the provision of professional services – particularly as the baby boom generation continues to age. Second, increasing globalization means that national borders will become a greater challenge for companies to manage, in terms of both their immigration and international commerce requirements. Lastly, the rapid pace of technological change will continue to...