Just as with the NLRA, the FLSA Does Not Preclude Collective Action Waivers in Arbitration Agreements, Sixth Circuit Holds
In a natural extension of the Supreme Court’s recent conclusion that the NLRA does not preclude the use of class or collective action waivers in employment-related arbitration agreements, the Sixth Circuit Court of Appeals has confirmed that such waivers are likewise permitted under the FLSA. Gaffers v. Kelly Services, 2018 U.S. App. LEXIS 22613 (6th Cir. Aug. 15, 2018). In so holding, the Sixth Circuit followed the lead of the Supreme Court’s decision in Epic Systems Corporation v. Lewis, 138 S. Ct. 1612 (2018). The Sixth Circuit has jurisdiction over Kentucky, Michigan, Ohio, and Tennessee.
The plaintiff, a former Kelly Services employee, brought suit under the FLSA on behalf of himself and his co-workers, alleging that the Company failed to properly pay him for all time worked. Because about fifty percent of the putative class (collective action) members the plaintiff seeks to represent signed arbitration agreements, the Company moved to compel arbitration. Denying the motion, the district court concluded that the NLRA and the FLSA rendered the agreements unenforceable and denied the motion.
On appeal, the Sixth Circuit easily dispensed with the lower court’s determination regarding the NLRA, in light of the Supreme Court’s interim decision in Epic Systems that the NLRA does not in fact preclude enforcement of class or collective actions waivers in employment-based arbitration agreements. Moving on, the Court of Appeals first noted that the plaintiff “faces a stout uphill climb” in his contention that the Arbitration Act and the FLSA’s collective action provision cannot be reconciled. Noting the Supreme Court’s direction in Epic Systems, “that a federal statute does not displace the Arbitration Act unless it includes a ‘clear and manifest’ congressional intent to make individual arbitration agreements unenforceable,” and that the right to engage in collective action alone does not satisfy this standard, the Sixth Circuit concluded that the FLSA contained no express language precluding the use of arbitration. On the contrary, the FLSA’s collective action provision “gives employees the option to bring their claims together [but] . . . does not require employees to vindicate their rights in a collective action.” Thus, “employees who do not sign individual arbitration agreements are free to sue collectively, and those who do sign individual arbitration agreements are not.” Notably, the Court of Appeals added, long ago the Supreme Court held that the Age Discrimination in Employment Act (ADEA), which contains exactly the same collective action language as (and is patterned on) the FLSA, does not displace the Arbitration Act, and thus there is no reason that such a provision should not be equally enforceable under the latter Act.
Finally, the Sixth Circuit rejected the plaintiff’s argument that the collective action waiver should be deemed unenforceable for public policy reasons, noting that such a basis would be the province of Congress, not the courts, as well as the plaintiff’s argument that the Arbitration Act’s “savings clause” should preclude enforceability of the waiver provision. As the Supreme Court made clear in Epic Systems, the savings clause – which allows courts to refuse to enforce arbitration agreements “upon such grounds as exist at law or in equity for the revocation of any contract” (e.g. fraud or duress) – cannot be used when the defense applies only to arbitration agreements, as opposed to all contracts in general, or when the defense would “interfere with the ‘fundamental attributes of arbitration,’” including the common attribute of individualized proceedings.