Hunton Employment & Labor Perspectives

On May 21, 2018, the United States Supreme Court issued its decision in Epic Systems Corp. v. Lewis, holding that the National Labor Relations Act (“NLRA”) does not prohibit the use of arbitration agreements with class/collective action waivers covered by the Federal Arbitration Act (“FAA”).   The Sixth Circuit has now concluded in Gaffers v. Kelly Services, Inc.  that the Fair Labor Standards Act (“FLSA”), like the NLRA, does not bar the use of arbitration agreements with class/collective action waivers.

The named plaintiff in Kelly Services was a call center worker who brought suit on behalf of himself and his co-workers (over 1,600 ultimately opted-in to the action) seeking back pay and liquidated damages under the collective action provision of the FLSA. While the named plaintiff did not sign an arbitration agreement, about half of the opt-ins did.  And those agreements provided that individual arbitration is the “only forum” for employment claims, including wage and hour claims.  Naturally, the employer moved to compel individual arbitration under the FAA. The district court found that the arbitration agreements violated the NLRA and FLSA and refused to enforce them. The employer appealed.

While on appeal, the Supreme Court rendered its decision in Epic Systems.  The Sixth Circuit relied on Epic Systems in determining that plaintiffs’ NLRA-based challenge to the arbitration agreements was unavailing.  The Sixth Circuit then turned to the plaintiffs’ FLSA-based contentions and held that nothing in the FLSA made it exempt from the Epic Systems holding.  Indeed, the Court noted the FLSA “gives employees the option to bring their claims together.  It does not require employees to vindicate their rights in a collective action, and it does not say that agreements requiring one-on-one arbitration become a nullity if an employee decides that he wants to sue collectively after signing one.”  Thus, the Sixth Circuit remanded the case to the district court to enforce the agreements.

The Sixth Circuit’s holding confirms the Supreme Court set a high bar to successfully challenge the enforceability of arbitration agreements and further supports the inclusion of waivers in arbitration agreements to avoid class and collective actions.