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N.D.Ga.: Defendant Barred from Unilateral Meetings With Putative Class Members Outside of Formal Discovery Process, Absent Detailed Disclosures to Alleviate Concerns re Chilled Participation and/or Retaliation
This case was before the court for consideration of the parties’ Joint Statement regarding restrictions on communications with putative class members, as required by L.R. 23.1(C)(2) of the Northern District of Georgia.
The specific issue raised by the parties’ Joint Submission was explained as follows:
In the Joint Statement, Plaintiffs raise a concern that Defendants will question putative class members about a policy requiring employees to lodge contemporaneous internal complaints about incorrect pay (“Complaint Policy”). Plaintiffs fear that if representatives of Defendants raise the Complaint Policy in communications with putative plaintiffs, the putative plaintiffs will believe that their failure to have lodged a contemporaneous complaint about incorrect pay may have been a violation of company policy that could result in their termination from employment. In its portion of the Joint Statement, Defendants do not deny an intention to make such inquiries of employees.
Initially the court discussed the basic applicable law:
[A]n order limiting communication between parties and potential class members should be based on a clear record and specific findings that reflect a weighing of a need for limitation and the potential interference with the rights of the parties. Only such a determination can insure that the court is furthering, rather than hindering, the policies embodied in the Federal Rules of Civil Procedure, especially Rule 23.
Gulf Oil Co. v. Bernard, 452 U.S. 89, 101–102, 101 S.Ct. 2193, 68 L.Ed.2d 693 (1981). “Unsupervised, unilateral communications with the plaintiff class sabotage the goal of informed consent by urging exclusion on the basis of a one-sided presentation of the facts, without opportunity for rebuttal. The damages from misstatements could well be irreparable.” Kleiner v. First Nat’l Bank of Atlanta, 751 F.2d 1193, 1203 (11th Cir.1985).
Based on its conclusion that there were inherent risks in the anticipated questioning by the defendants, the court held that the defendants were barred from communicating with former employee putative class members regarding the subject matter of the case, outside of the regular discovery process in the case and without the consent of plaintiff’s counsel. While the court permitted defendants’ counsel to speak with current employees who were putative class members, it set forth detailed prerequisites prior to any such communications, in order to safeguard against defenadnts’ improperly influencing putative class members from exercising their rights under the FLSA:
The Court finds that the risks inherent in the anticipated questioning by Defendants warrant the following limitations on Defendants’ communications with potential class members.
There shall be no communications with any named Plaintiff or with any current or future opt-in Plaintiffs outside the formal discovery process or without the consent of the named Plaintiff’s counsel of record, except-as to any currently employed present or future opt-in Plaintiff-for routine business matters unrelated to this action.
With respect to any presentation of information, including any views or opinions, to any “putative class members” by the Defendants—whether acting through management, counsel, other employees, or any other agent of any kind—that relates to the allegations and claims in this action, whether for the purpose of gathering information in a one-on-one or group basis to defend this action or to address any employee complaints regarding past, current or future compensation practices, such communication shall commence with the following statements:
(a) The person(s) present on the Defendants’ behalf is a Defendant employee or agent acting at the direction of Defendants’ management;
(b) The person(s) present on the Defendants’ behalf is there to address a lawsuit filed against the Defendants, as well as employee complaints, involving allegations that the Defendants failed to pay employees all the wages and overtime they had earned and were entitled to receive;
(c) The lawsuit is a class-action—which means the individual may receive money as a result of the lawsuit;
(d) The allegations of wrongdoing (accurately stated), accompanied by a copy of the Third Amended Complaint;
(e) The “putative class member” is under no obligation to stay, or listen, or speak, or respond;
(f) No record of anyone who does not stay, speak, or respond is being made and no record of who does not stay, speak, or respond will be made at any future time;
(g) No adverse action will be taken if the “putative class member” chooses not to stay, speak, or respond;
(h) No adverse action will be taken if the “putative class member” says, in substance, they believe they not were not properly compensated or did not receive all compensation owed to them, whether or not they complained to anyone about any compensation issues; and
(i) The “putative class member” is free to leave at any time, including at this point.
Click Wilson v. Regions Financial Corporation to read the entire Order Regarding Communications With Putative Class Members.
While the procedural posture of this case was somewhat unique, in that the Northern District of Georgia has a detailed/explicit rule regarding pre-certification communications (and there was a Rule 23 class claim in addition to the FLSA collective action claim), this decision will likely serve as a blueprint for many courts going forward, given the chilling effect unilateral meetings with current and former employees can have, as many courts have previously noted.
6th Cir.: Collective Action Waivers in Employees’ Separation Agreements Did Not Validly Waive Employees’ Rights to Participate in Collective Action Under FLSA, Absent Valid Arbitration Provision
Although this one is not exactly breaking news, we are discussing it because of its importance in the general landscape of FLSA jurisprudence. As discussed here, this case was before the Sixth Circuit on Plaintiffs’ appeal, regarding an issue of first impression. Specifically, the Sixth Circuit was asked to decide whether an agreement by employees to waive their rights to participate in a collective action under the FLSA can be enforceable in the absence of an agreement to arbitrate their FLSA claims. Reversing the district court, the Sixth Circuit held that such agreements are unenforceable, absent an agreement to arbitrate the claims in an alternative forum, because in such a situation there is no congressional interest that weighs against the remedial goals of the FLSA.
In this case, former employees of the Defendant brought putative collective action against their former employer to recover overtime wages under the Fair Labor Standards Act (FLSA). The district court determined that collective-action waiver in certain employees’ separation agreements was enforceable, despite the fact that the separation agreements contained no agreement to arbitrate their FLSA claims. The employees appealed, and the Sixth Circuit reversed.
Framing the parties’ respective positions, the Sixth Circuit explained:
This brings us to the merits regarding the validity of the unmodified collective-action waivers. The plaintiffs argue that this court’s decision in Boaz v. FedEx Customer Information Services, Inc., 725 F.3d 603 (6th Cir.2013), controls because it holds that an employee will not be bound by a contract entered into with his employer that has the effect of limiting his rights under the FLSA. In response, KeHE argues that cases upholding agreements that require employees to submit to arbitration on an individual basis are more on point. No court of appeals appears to have squarely addressed this issue outside of the arbitration context.
Given its recent related decision in Boaz, the Sixth Circuit began by discussing that case’s implications on the issue presented in this case:
This court’s decision in Boaz provides the relevant framework for the issue before us. In Boaz, the plaintiff-employee signed an employment agreement that contained a provision requiring her to bring any legal action against the defendant-employer within “6 months from the date of the event forming the basis of [the] lawsuit.” Id. at 605. When the plaintiff filed an FLSA lawsuit after the six-month time period had elapsed, the defendant moved for summary judgment, arguing that her claims were untimely under the employment agreement.
This court disagreed. It first noted that “[s]hortly after the FLSA was enacted, the Supreme Court expressed concern that an employer could circumvent the Act’s requirements—and thus gain an advantage over its competitors—by having its employees waive their rights … to minimum wages, overtime, or liquidated damages.” Id. at 605–06. The Boaz court concluded that because the waiver of the statutory-limitations period would have deprived the plaintiff of her FLSA rights, the provision was invalid. Id. at 606. It also rejected the defendant’s argument that a plaintiff may waive procedural rights under the FLSA, just not substantive ones. Id. Finally, the court distinguished cases enforcing an employee’s agreement to arbitrate his or her claims on an individual basis due to the strong federal presumption in favor of arbitration. Id. at 606–07 (distinguishing Floss v. Ryan’s Family Steak Houses Inc., 211 F.3d 306 (6th Cir.2000), on that basis).
Following its own reasoning from the Boaz decision, the Sixth Circuit concluded that normally a plaintiff’s right to participate in a collective action under 29 U.S.C. 216(b) cannot be waived:
Boaz therefore implies that a plaintiff’s right to participate in a collective action cannot normally be waived. The court clearly said that “[a]n employment agreement cannot be utilized to deprive employees of their statutory [FLSA] rights.” Id. (alteration in original) (internal quotation marks omitted). And “Congress has stated its policy that ADEA plaintiffs [and thus FLSA plaintiffs because the statutory language is identical] should have the opportunity to proceed collectively.” Hoffmann–La Roche Inc. v. Sperling, 493 U.S. 165, 170, 110 S.Ct. 482, 107 L.Ed.2d 480 (1989). We have little reason to think that the right to participate in a collective action should be treated any differently than the right to sue within the full time period allowed by the FLSA. The concern, Boaz explained, is that “an employer could circumvent the Act’s requirements—and thus gain an advantage over its competitors—by having its employees waive their rights under the Act.” 725 F.3d at 605.
Conscious of the body of law that has permitted collective action waivers when they are contained in agreements containing arbitration clauses, the court was careful to distinguish such cases:
We are aware, of course, that the considerations change when an arbitration clause is involved. Boaz explained that “an employee can waive his right to a judicial forum only if the alternative forum allow[s] for the effective vindication of [the employee’s] claim.” Id. at 606–07 (alteration in original) (internal quotation marks omitted). Arbitration, it noted, is such a forum. Id. at 606. But this line of precedents is of only minimal relevance here because the plaintiffs’ collective-action waivers in this case contained no arbitration clause. And, in any event, none of our precedents permitting arbitration of FLSA claims has addressed employees’ collective-action rights.
KeHE nonetheless points to cases from other circuits enforcing agreements to arbitrate FLSA claims on an individual basis. As KeHE notes, the Eleventh Circuit recently addressed the jurisprudence of the courts of appeals on collective-action waivers in the arbitration context in Walthour v. Chipio Windshield Repair, LLC, 745 F.3d 1326 (11th Cir.2014). It determined that
all of the circuits to address this issue have concluded that § 16(b) does not provide for a non-waivable, substantive right to bring a collective action. See Sutherland v. Ernst & Young LLP, 726 F.3d 290, 296–97 & n. 6 (2d Cir.2013) (determining that the FLSA does not contain a “contrary congressional command” that prevents an employee from waiving his or her ability to proceed collectively and that the FLSA collective action right is a waivable procedural mechanism); Owen [v. Bristol Care, Inc.], 702 F.3d [1050,] 1052–53 [ (8th Cir.2013) ] (determining that the FLSA did not set forth a “contrary congressional command” showing “that a right to engage in class actions overrides the mandate of the FAA in favor of arbitration”); Carter v. Countrywide Credit Indus., Inc., 362 F.3d 294, 298 (5th Cir.2004) (rejecting the plaintiffs’ claim that their inability to proceed collectively deprived them of a substantive right to proceed under the FLSA because, in Gilmer [v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991) ], the Supreme Court rejected similar arguments regarding the ADEA); Adkins [v. Labor Ready, Inc.], 303 F.3d [496,] 503 [ (4th Cir.2002) ] (determining that a plaintiff failed to point to any “suggestion in the text, legislative history, or purpose of the FLSA that Congress intended to confer a non-waivable right to a class action under that statute” and that the plaintiff’s “inability to bring a class action, therefore, cannot by itself suffice to defeat the strong congressional preference for an arbitral forum”); cf. D.R. Horton [v. NLRB ], 737 F.3d [344,] 362 [ (5th Cir.2013) ] (determining that the National Labor Relations Act does not contain a contrary congressional command overriding the application of the FAA).
Id. at 1336. The Eleventh Circuit then joined this emerging consensus. Id. Crucially, however, the respective waiver agreements in all of the above-cited cases included provisions subjecting the employees to arbitration. See Walthour, 745 F.3d at 1330 (noting the existence of an arbitration*592 agreement between the parties); Sutherland, 726 F.3d at 296 (same); Owen, 702 F.3d at 1052 (same); Carter, 362 F.3d at 298 (same); Adkins, 303 F.3d at 498 (same).
These circuit decisions, in turn, rely on the Supreme Court’s decisions in Gilmer, 500 U.S. at 35, 111 S.Ct. 1647 (“We conclude that Gilmer has not met his burden of showing that Congress, in enacting the ADEA, intended to preclude arbitration of claims under that Act.”), and American Express Co. v. Italian Colors Restaurant, ––– U.S. ––––, 133 S.Ct. 2304, 2309, 186 L.Ed.2d 417 (2013) (holding that “[n]o contrary congressional command requires us to reject the waiver of class arbitration here”). See Walthour, 745 F.3d at 1331 (citing Gilmer and Italian Colors); Sutherland, 726 F.3d at 296 (quoting Italian Colors ); Carter, 362 F.3d at 298 (citing Gilmer); Adkins, 303 F.3d at 502 (citing Gilmer ). Accordingly, none of the foregoing authorities speak to the validity of a collective-action waiver outside of the arbitration context.
Thus, the Sixth Circuit concluded that, in the absence of a valid arbitration agreement, a collective action waiver is unenforceable because there is no countervailing federal policy (i.e. the FAA) that outweighs the remedial policy articulated in the FLSA:
Because no arbitration agreement is present in the case before us, we find no countervailing federal policy that outweighs the policy articulated in the FLSA. The rationale of Boaz is therefore controlling. Boaz is based on the general principle of striking down restrictions on the employees’ FLSA rights that would have the effect of granting their employer an unfair advantage over its competitors. Requiring an employee to litigate on an individual basis grants the employer the same type of competitive advantage as did shortening the period to bring a claim in Boaz. And in cases where each individual claim is small, having to litigate on an individual basis would likely discourage the employee from bringing a claim for overtime wages. Boaz therefore controls the result here where arbitration is not a part of the waiver provision.
Click Killion v. KeHE Distributors, LLC to read the Sixth Circuit’s decision.
11th Cir.: District Court Correctly Refused to Enforce Arbitration Agreement Obtained From Putative Class Members With Motion for Conditional Cert Pending
Employers seem to getting increasingly aggressive with class waivers, arbitration agreements in the wake of recent high court rulings which are seemingly boundless. In the wake of these recent decisions, some employers—who previously did not include waivers or arbitration agreements in their employment agreements—are seeking to play catch up. Troublingly, we seem to be seeing more and more situations where employers, facing the prospect of class/collective actions based on their often willful violations of wage and hour laws are attempting to force arbitration agreements on their employees in an effort to blunt efforts by their employees to recover their rightful wages. However, most courts faced with such situations have invalidated these improperly obtained arbitration clauses, recognizing that employers are in a position to exert undue pressure on employees fearful for their jobs, and that such arbitration “agreements” are frequently anything but an agreement between two parties consenting to arbitration of their own will.
In a recent decision, the Eleventh Circuit was called upon to review one such decision by a district court (first discussed here) that held such a forced arbitration clause to be invalid, and affirmed the district court’s order denying the defendant’s motion to enforce arbitration under the agreements at issue.
Laying out the salient facts of the case, the court explained:
To support its order denying Citi Trends’s motion to compel arbitration, the district court made the following findings of fact:
Citi Trends devised and implemented a new alternative dispute resolution (“ADR”) policy in the late spring and early summer of 2012—after it was served with the complaint in this action on February 27, 2012, and after the district court set a scheduling conference for May 31, 2012. Weeks after the district court’s May 31, 2012 scheduling order, Citi Trends began to roll out its new ADR policy. The ADR policy included a mandatory agreement to arbitrate all disputes individually rather than collectively.
By June 30, 2012, Citi Trends sent its human resource representatives to meet with store managers to roll out the new ADR policy—but only to putative collective action members (i.e., store managers). Throughout the summer, Citi Trends’s human resource representatives met individually with all store managers across the country. Citi Trends had two employees in each ADR meeting: a human resources representative and a “witness.”
The human resources representative who met with the store managers advised Citi Trends in its employment decisions. Thus, the store managers reasonably believed the human resources representative had authority to make or influence employment decisions, including hiring and firing decisions.
Store managers were ordered to attend the ADR meetings by their supervisors. Citi Trends did not inform the store managers of the true purpose of the mandatory meetings. Instead of telling the store managers that the meetings concerned the company’s new ADR policy, Citi Trends told the store managers that the mandatory meetings concerned the issuance of a new employee handbook.
Typically, Citi Trends rolled out its new employee handbook in a group setting. The handbook was generally provided in printed form (i.e., not as a photocopy), and the employees were required to sign for the handbook. Here, however, Citi Trends did not follow any of its general procedures for rolling out the employee handbook. Instead, Citi Trends (1) held two-on-one private meetings with each store manager in a small, back room in Citi Trends retail stores—the same places where the store interrogated or investigated its employees, (2) discussed only the ADR policy and the fill-in-the-blank declarations related to the store managers’ job duties, (3) provided photocopied versions of the employee handbooks as the store managers left the meetings, and (4) did not require the store managers to sign for the photocopied employee handbook.FN6 The district court found that this rushed and atypical rollout of the employee handbook demonstrated that Citi Trends’s handbook rollout was “pretext for presenting the [arbitration] Agreement to the [store managers] to derail their participation in this lawsuit.”
When a store manager arrived at the back-room meetings, a human resources representative greeted the store manager. A second individual was also at each meeting; however, this person was not introduced to, or known by, the store managers.
At the meetings, Citi Trends’s human resources representative gave the store managers these documents: the arbitration agreement, a fill-in-the-blank declaration, and the store manager disclosure. The store managers were asked to sign each of these documents at the meeting.
Citi Trends informed the store managers that the arbitration agreement was a condition of continued employment. The store managers understood that they would be fired if they did not assent to the arbitration agreement or the new ADR policy. Thus, the store managers lacked meaningful choice in whether to sign the arbitration agreements or other documents. The district court found the setting of the back-room meetings to be a “highly coercive” and “interrogation-like.”
Opt-in plaintiffs testified that they signed the documents but felt intimidated by the human resources representative. They also felt pressured to sign the arbitration agreements to avoid losing their jobs. Even when specifically requested, Citi Trends did not give the store managers copies of the documents that the store managers signed.
The district court found that Citi Trends did not conceive or begin to institute its ADR policy until after the district court held a scheduling conference to determine when and how Billingsley must move for conditional certification. Citi Trends then rolled out its ADR policy in a “blitzkrieg fashion” and only required potential members of this collective action to agree to the ADR policy. The district court found that Citi Trend’s “ADR roll-out was a hurried reaction specifically targeted at curtailing this litigation.”
The district court found that the “purpose and effect” of the arbitration agreement was “to protect Citi Trends in this lawsuit.” The district court also found that the timing of the arbitration agreement’s rollout “was calculated to reduce or eliminate the number of collective action opt-in Plaintiffs in this case” and the rollout was “replete with deceit” and “designed to be[ ] intimidating and coercive.”
After a discussion of the FLSA, its remedial purpose and the broad discretion afforded to courts in managing collective actions, the Eleventh Circuit held that that the district court properly exercised its broad discretion in denying the defendant’s motion to compel arbitration, because such a denial was in line with the court’s responsibilities to manage communications between the parties and putative class members. Specifically, the court reasoned:
Given the “broad authority” that the district court has to manage parties and counsel in an FLSA collective action, the district court did not abuse its discretion in determining that Citi Trends’s conduct in the summer of 2012 undermined the court’s authority to manage the collective action. Nor did the district abuse its discretion in determining that—to correct the effect of Citi Trends’s misconduct—it would allow putative collective action members to join the lawsuit notwithstanding their coerced signing of the arbitration agreements.
Whatever right Citi Trends may have had to ask its employees to agree to arbitrate, the district court found that its effort in the summer of 2012 was confusing, misleading, coercive, and clearly designed to thwart unfairly the right of its store managers to make an informed choice as to whether to participate in this FLSA collective action. Since the arbitration agreements by their terms will directly affect this lawsuit, the district court had authority to prevent abuse and to enter appropriate orders governing the conduct of counsel and the parties. See Hoffmann–La Roche, 493 U.S. at 171, 110 S.Ct. at 486–87; see also Kleiner, 751 F.2d at 1203 (class action).
The district court simply did what other district courts routinely do: exercise discretion to correct the effects of pre-certification communications with potential FLSA collective action members after misleading, coercive, or improper communications are made. See, e.g., Balasanyan v. Nordstrom, Inc., No. 11–CV2609–JM–WMC, 2012 WL 760566, at * 1–2, 4 (S.D.Cal. Mar.8, 2012) (refusing to enforce individual arbitration agreement in an FLSA action because the defendant’s imposition of the agreement was an improper class communication); Williams v. Securitas Sec. Servs. USA, Inc., No. 10–7181, 2011 U.S. Dist. LEXIS 75502, at *8–12 (E.D.Pa. July 13, 2011) (invalidating arbitration agreement imposed on the defendant’s employees during pre-certification stage of FLSA litigation and ordering corrective measures because the arbitration agreement was a “confusing and unfair communication” with the potential opt-in plaintiffs); Ojeda–Sanchez v. Bland Farms, 600 F.Supp.2d 1373, 1379–81 (S.D.Ga.2009) (granting a limited protective order in FLSA collective action where the defendants engaged in unsupervised, unsolicited, in-person interviews of the plaintiffs in an environment that encouraged speedy and uninformed decision-making); Longcrier v. HL–A Co., 595 F.Supp.2d 1218, 1229–30 (S.D.Ala.2008) (striking declarations obtained through the defendants’ abusive and misleading communications with prospective opt-in plaintiffs); Jones v. Casey’s Gen. Stores, 517 F.Supp.2d 1080, 1086, 1089 (S.D.Iowa 2007) (limiting the plaintiffs’ counsel from affirmatively soliciting potential opt-in plaintiffs to join the FLSA action and requiring counsel to modify their website to provide “only a factual, accurate, and balanced outline of the proceedings”); Maddox v. Knowledge Learning Corp., 499 F.Supp.2d 1338, 1342–44 (N.D.Ga.2007) (observing that district courts in § 216(b) actions rely on broad case management discretion by limiting misleading, pre-certification communications and exercising that discretion in the case before the court by ordering the plaintiffs to correct false, unbalanced, and misleading statements on their website); Belt v. Emcare, Inc., 299 F.Supp.2d 664, 667–70 (E.D.Tex.2003) (sanctioning the employer and enjoining the employer from communicating ex parte with potential class action members because the employer intentionally attempted to subvert the district court’s role in the FLSA collective action by unilaterally sending a misleading and coercive letter to potential plaintiffs that encouraged those persons not to join).
District courts’ corrective actions have included refusal to enforce arbitration agreements instituted through improper means and where the timing of the execution of those agreements was similar to the post-filing, pre-certification timing in this case. See, e.g., Balasanyan, 2012 WL 760566, at * 1–2; Williams, 2011 U.S. Dist. LEXIS 75502, at *8–12; see also In re Currency Conversion Fee Antitrust Litig., 361 F.Supp.2d at 252–54 (imposing similar corrective action in Rule 23 class action).
The district court did not abuse its discretion in correcting the effects of Citi Trends’s improper behavior in this case. The district court held an initial hearing, after which it denied Citi Trends’s motion to compel arbitration. The court then reconsidered its order, held an additional two-day evidentiary hearing, made specific and detailed findings of fact that were supported by the record, and took minimal action to correct the effects of Citi Trends’s conduct.
The district court limited its order temporally and substantively. The district court limited its order to those agreements signed under the coercive conditions used by Citi Trends in the summer of 2012. And, the district court limited its order to this particular FLSA action. The court specifically said that it was not ruling on the enforceability of the arbitration agreements as they relate to other cases or controversies. The district did not restrict Citi Trends from entering into new arbitration agreements with the store managers; nor did the court prevent store managers from electing to comply with the terms of the arbitration agreements that they signed in the summer of 2012.
The district court’s limited remedial action is not an abuse of its considerable discretion to manage this collective action. Accord Kleiner, 751 F.2d at 1203 (holding that a district court’s power to manage a class action included the power to prohibit a defendant from making “unsupervised, unilateral communications with the plaintiff class”). That is especially true given the opt-in nature of FLSA collective actions. Because FLSA plaintiffs must opt-in, unsupervised, unilateral communications with those potential plaintiffs can sabotage the goal of the FLSA’s informed consent requirement by planting the slightest seed of doubt or worry through the one-sided, unrebutted presentation of “facts.” Because the damage from misstatements could well be irreparable, the district court must be able to exercise its discretion to attempt to correct the effects of such actions. See Hoffmann–La Roche, 493 U.S. at 170, 110 S.Ct. at 486 (noting that court intervention in the collective action notice process may be necessary).
Because we affirm the district court’s decision to deny enforceability of the arbitration agreements in this case, we necessarily must affirm the district court’s order denying Citi Trends’s motion to compel arbitration.
Click Billingsley v. Citi Trends, Inc. to read the entire Opinion.
S.D.N.Y.: Existence of Arbitration Agreements for Some (Not All) Employees in Putative Class, Irrelevant re “Similarly Situated” Inquiry at Stage I
This case was before the court on plaintiff’s motion for conditional certification. The case concerned allegations of impermissible tip credit, inadequate notice of same (under 203(m)), and other allegations of unpaid minimum wages. As further discussed here, defendants largely focused their attack on their twin contentions that the class proposed by plaintiff was not similarly situated to him and/or was too broad, because it contained English speakers (the plaintiff did not speak English) and employees and former employees who had signed arbitration agreements (the plaintiff did not). The court rejected both of these contentions, and reasoned that neither of these factors were appropriately considered at Stage I, the conditional certification stage.
Rejecting the defendant’s arguments in this regard, and holding that such issues were more properly reserved for Stage II or decertification analysis, the court reasoned:
The Court disagrees with defendants’ arguments. Case law imposes only a very limited burden on plaintiffs for purposes of proceeding as a conditional collective action. “[C]ourts have conditionally certified collective actions under the FLSA where plaintiffs, based on their firsthand observations, identify an approximate class of similarly situated individuals.” Hernandez v. Immortal Rise, Inc ., 2012 WL 4369746, at *4 (E.D.N.Y. Sept. 24, 2012). Here, Romero has done just that, stating in his declaration that he “personally observed … Defendants’ policy to pay below the statutory minimum wage rate to all tipped employees,” that he and other tipped employees were compensated “all at rates below the minimum wage,” that he has never seen a tipped employee “receive proper notice explaining what a tip credit is,” that he and other tipped employees had to spend more than 20% of their daily time in non-tipped related activities, that he observed defendants engaging in time-shaving, that he observed when employees were sent home without call-in pay if the restaurant was not busy, and that he “personally observed that all non-exempt employees received the same form of wage and hour notice.” Romero Decl. ¶¶ 2–9. The affidavit of a plaintiff attesting to the existence of similarly situated plaintiffs is sufficient for the purposes of a motion to approve a collective action. See Cheng Chung Liang v. J.C. Broadway Restaurant, Inc., 2013 WL 2284882, at *2–3 (S.D.N.Y. May 23, 2013) (“For the purposes of this motion, … plaintiffs’ evidence—in the form of [one employee’s] affidavit—is sufficient to establish that … there may be class members with whom he is similarly situated.”). Thus, Romero has made a sufficient showing that he and potential plaintiffs “were victims of a common policy or plan that violated the law.” Hoffman, 982 F.Supp. at 261.
Defendants’ principal argument is that because other employees signed arbitration agreements, Romero is not similarly situated to these other employees. Def. Mem. at 6–14. Defendants assert that the claims here are “properly pursued solely in arbitration, on an individual basis, by all of Ruhlmann’s employees who signed such an agreement” and therefore that “Ruhlmann’s employees are dissimilar from Plaintiff Romero and must pursue any claims they may have in an arbitral forum rather than federal court.” Def. Mem. at 8–9. Romero challenges both the enforceability and the validity of these arbitration agreements. He argues that the agreements are not enforceable because they violate the fee-shifting provision of the FLSA. Reply at 6–7. Romero also argues that defendants caused several of these agreements to be signed by coercion, that it is highly likely that several employees did not actually sign arbitration agreements, and that the validity of the signatures on several agreements are questionable. Reply at 7–9; Pl. May 31 Letter at 2. Additionally, he asserts that the agreements are unenforceable because they limit the statute of limitations on employees’ claims to six months and because they were not provided to employees in their native language. Pl. Aug. 20 Letter at 2–3.
As already noted, the question on a motion to proceed as a collective action is whether the proposed plaintiffs are similarly situated “with respect to their allegations that the law has been violated.” Young, 229 F.R.D. at 54; accord Meyers, 624 F.3d at 555 (in conditional collective action approval, question is whether the proposed plaintiffs are similarly situated to the named plaintiffs “with respect to whether a FLSA violation has occurred”). The arbitration agreements do not create any differences between Romero and the proposed plaintiffs with respect to Romero’s claims that defendants have violated the FLSA. That is, the validity vel non of the agreements is unrelated to any claims of a violation of the FLSA. Under this reasoning, the existence of differences between potential plaintiffs as to the arbitrability of their claims should not act as a bar to the collective action analysis. Indeed, courts have consistently held that the existence of arbitration agreements is “irrelevant” to collective action approval “because it raises a merits-based determination.” D’Antuono v. C & G of Groton, Inc., 2011 WL 5878045, at *4 (D.Conn. Nov. 23, 2011) (citing cases); accord Hernandez, 2012 WL 4369746, at *5;Salomon v. Adderly Indus., Inc., 847 F.Supp.2d 561, 565 (S.D.N.Y.2012) (“The relevant issue here, however, is not whether Plaintiffs and [potential opt-in plaintiffs] were identical in all respects, but rather whether they were subjected to a common policy to deprive them of overtime pay ….”) (alteration in original) (internal citation and quotation marks omitted).
In support of its argument that the existence of arbitration agreements merits denial of collective action approval, defendants make arguments about the eventual enforceability of the arbitration agreements and rely on cases in which courts granted motions to dismiss and compel arbitration because of such agreements. See Def. Mem. at 6–7. Critically, defendants do not even address the cases holding that consideration of the validity of arbitration agreements is inappropriate in the context of a motion to approval an FLSA collective action. The situation here is thus akin to the situation in Raniere v. Citigroup Inc., 827 F.Supp.2d 294 (S.D .N.Y.2011), rev’d on other grounds, 2013 WL 4046278 (2d Cir.2013), in which the court remarked:
Defendants have failed to cite a single authority finding that due to the possibility that members of the collective [action] might be compelled to bring their claims in an arbitral forum, certification is not appropriate. Such arguments are best suited to the second certification stage, where, on a fuller record, the court will examine whether the plaintiffs and opt-ins are in fact similarly situated.
Id. at 324.
Defendants’ strongest argument is that “[i]t would be a waste of judicial and party resource to force defendants” to send notice to individuals ultimately bound to arbitrate claims. Def. June 4 Letter at 3. But the notice requirement is not unduly burdensome in this case and the defendants’ proposal essentially amounts to an invitation for the Court to adjudicate the validity of the arbitration agreements. But, as already noted, case law makes clear that this sort of merits-based determination should not take place at the first stage of the conditional collective action approval process. Plaintiff has raised at least colorable arguments to support the invalidity or unenforceability of the arbitration agreements, some of which are fact-intensive. Case law holds, however, that issues of fact surrounding arbitration agreements are properly resolved at the second stage of the two-step inquiry. D’Antuono, 2011 WL 5878045, at *5; accord Salomon, 847 F.Supp.2d at 565 (“[A] fact-intensive inquiry is inappropriate at the notice stage, as Plaintiffs are seeking only conditional certification.”) (citing cases); Ali v. Sugarland Petroleum, 2009 WL 5173508, at *4 (S.D.Tex. Dec. 22, 2009) (“The Court will make the determination [of whether to exclude those who signed arbitration agreement from the class] at the conclusion of discovery, when it may properly analyze the validity of the arbitration agreement.”). Defendants not only fail to distinguish these cases, they do not even proffer any argument as to why the reasoning of these cases is wrong.
Defendants have submitted evidence contradicting Romero’s claim that he is similarly situated to other employees with respect to other aspects of his claims, such as his understanding of the tip credit. See Collin Decl. ¶ 9. However, “the two-stage certification process exists to help develop the factual record, not put an end to an action on an incomplete one.” Griffith v. Fordham Fin. Mgmt., Inc., 2013 WL 2247791, at *3 (S.D.N.Y. May 22, 2013) (granting collective action approval where defendant had put forth “contravening evidence”) (emphasis omitted) (internal citations and quotation marks omitted). For these reasons, Romero’s motion for conditional approval of a collective action is granted.
Click Romero v La Revise Associates, L.L.C. to read the court’s entire Opinion & Order.
S.D.Ohio: Stage I Scrutiny Applied to Motion for Conditional Certification, Filed Prior to Bulk of Discovery, Notwithstanding Discovery Thereafter
Engel v. Burlington Coat Factory Direct Corp.
In a scenario that seems to be playing out more and more throughout the country, given the prevalence of FLSA collective action filings, this court was faced with a decision regarding which type of scrutiny to apply to plaintiffs’ motion for conditional certification of a collective action. Although the plaintiffs filed their motion only three (3) months into discovery, by the time the court was able to address the motion, discovery had concluded. While the plaintiffs maintained that the court should apply Stage I scrutiny, the defendants argued that Stage II scrutiny (or “final certification” scrutiny) should be applied, because discovery had been completed after plaintiffs filed their motion. The court reasoned that the lower Stage I scrutiny should be applied, based on the posture of the case when plaintiffs filed their Motion, not when the decision was rendered.
Discussing the issue, the court explained:
Plaintiffs and Defendants dispute whether this suit is in the first or second phase of inquiry. Defendants argue that this case is fully discovered, as the parties have produced more than 3,500 documents, served multiple sets of interrogatories and requests for production, and have taken six depositions. (Doc. 24, at 23). Plaintiffs filed their motion for conditional certification eight months after discovery opened, and five months before discovery closed on March 29, 2013. (Id.). Plaintiffs argue that because no discovery was permissible prior to the February 13, 2012 26(f) conference, and the parties agreed to postpone discovery pending mediation in July 2012, discovery had occurred less than three months before their motion for conditional certification was filed. (Doc. 26, at 8). Before Plaintiffs’ motion was filed in October, only three depositions had been taken. (Id.)
This Court finds that this suit is in the first phase of inquiry. Discovery closed on March 29, 2013, and Plaintiffs’ motion was filed in October 2012. Thus, discovery had not completed by the time Plaintiffs’ motion was filed. Moreover, as Plaintiffs correctly point out, only three out of eight total months of discovery took place before their motion was filed.
In ruling on Plaintiff’s motion, the Court’s analysis will employ the first phase of inquiry.
Click Engel v. Burlington Coat Factory Direct Corp. to read the entire Order & Opinion.
Oxford Health Plans LLC v. Sutter
Although not an FLSA case, this case has far ranging effects throughout the litigation and arbitration worlds. The issue presented to the Court was whether an arbitrator exceeded his authority by rendering a clause construction of the parties’ arbitration agreement that permitted class arbitration, where the parties’ arbitration agreement was silent on its face as to the issue. The Court held that the arbitrator did not exceed his authority and, as the Third Circuit had prior, affirmed the District Court’s opinion upholding the arbitrator’s clause construction permitting class arbitration, because it was a well-reasoned opinion and the parties’ had explicitly asked the arbitrator to render a clause construction. In so doing, the Supreme Court distinguished this case from its prior case Stolt-Nielsen explaining that:
[ ] Oxford misreads Stolt-Nielsen: We overturned the arbitral decision there because it lacked any contractual basis for ordering class procedures, not because it lacked,in Oxford’s terminology, a “sufficient” one. The parties in Stolt-Nielsen had entered into an unusual stipulation that they had never reached an agreement on class arbitration. See 559 U. S., at 668–669, 673. In that circumstance, we noted, the panel’s decision was not—indeed, could not have been—”based on a determination regarding the parties’ intent.” Id.,at 673, n. 4; see id., at 676 (“Th[e] stipulation left no room for an inquiry regarding the parties’ intent”). Nor, we continued, did the panel attempt toascertain whether federal or state law established a “default rule” to take effect absent an agreement. Id., at 673. Instead, “the panel simply imposed its own conception of sound policy” when it ordered class proceedings. Id.,at 675. But “the task of an arbitrator,” we stated, “is to interpret and enforce a contract, not to make public policy.” Id.,at 672. In “impos[ing] its own policy choice,” the panel “thus exceeded its powers.” Id., at 677.
The contrast with this case is stark. In Stolt-Nielsen, the arbitrators did not construe the parties’ contract, and did not identify any agreement authorizing class proceedings. So in setting aside the arbitrators’ decision, we found not that they had misinterpreted the contract, but that they had abandoned their interpretive role. Here, the arbitrator did construe the contract (focusing, per usual, on its language), and did find an agreement to permit class arbitration. So to overturn his decision, we would have to rely on a finding that he misapprehended the parties’ intent. But §10(a)(4) bars that course: It permits courts to vacate an arbitral decision only when the arbitrator strayed from his delegated task of interpreting a contract, not when he performed that task poorly. Stolt-Nielsen and this case thus fall on opposite sides of the line that §10(a)(4) draws to delimit judicial review of arbitral decisions.
While the unanimous decision supports the idea that class arbitration is permissible where the parties’ agreement is silent on its face, as with its prior decisions on class arbitration issues, the decision also leaves many related issues unresolved.
Click Oxford Health Plans LLC v. Sutter to read the Court’s opinion and Justice Alito’s concurring opinion.