Employers concerned about the cost and unpredictability of the civil judicial system may elect to require binding individual arbitration of disputes with their employees. In response, employees trying to get their claims before a jury, or those seeking class or collective relief increasingly are challenging the validity of such arbitration provisions. Last month, the Eleventh Circuit Court of Appeals concluded that the Fair Labor Standards Act does not preclude such arbitration agreements from requiring employees to individually arbitrate overtime and minimum wage claims.
In Walthour v. Chipio Windshield Repair, LLC, the plaintiffs were two former employees who claimed that they had not been paid overtime. They sued, seeking collective action relief under the FLSA, and the employer sought to dismiss the complaint in favor of individual arbitration of the claims. The plaintiffs claimed that the FLSA specifically authorizes collective actions, and that this right overrides provisions of the Federal Arbitration Act that typically favor the terms of such agreements.
The Eleventh Circuit affirmed dismissal of the claims in favor of individual arbitration. The court concluded that nothing in the FLSA creates a substantive right to collective action claims, and that Supreme Court precedent demonstrates the ability of parties to waive such procedural rights under similar federal labor laws. The Eleventh Circuit was not convinced by the plaintiff’s argument that arbitration of individual FLSA claims was economically infeasible.
Based on this reasoning, unless the underlying legislation specifically exempts bans on class or collective action arbitrations, federal courts will presume that these rights are waivable. Also, this decision did not address the National Labor Relations Board’s position that bans on class or collective arbitration violate the NLRA.