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W.D.Wisc.: Loan Officers Compelled to Arbitrate FLSA Claims, But Class Waiver Stricken In Light of D.R. Horton
Herrington v. Waterstone Mortgage Corp.
In this proposed collective action, the plaintiff sought to pursue a collective action on behalf of defendant’s loan officers, seeking unpaid overtime wages under the FLSA. As discussed here, the defendant moved to to dismiss or stay the case on the ground that plaintiff’s claims were subject to an arbitration agreement. Significantly, while the court enforced the arbitration agreement and remanded the case to arbitration, it struck the purported class waiver portion of the arbitration agreement in light of the recent holding in In re D.R. Horton, Inc.
The specific language at issue was the following language from the parties’ agreement to arbitrate:
“[A]ny dispute between the parties concerning the wages, hours, working conditions, terms, rights, responsibilities or obligations between them or arising out of their employment relationship shall be resolved through binding arbitration in accordance with the rules of the American Arbitration Association applicable to employment claims. Such arbitration may not be joined with or join or include any claims by any persons not party to this Agreement. Except as otherwise set forth herein, the parties will share equally in the cost of arbitration.”
After discussing a litany of cases from the NLRB holding that claims for unpaid wages by workers represent concerted activity, the court discussed the ramifications of the recent D.R. Horton case and held that the class action waiver here was unenforceable. In so doing the court addressed and rejected defendant’s arguments as to why D.R. Horton should not be applied to the case. Specifically, the court rejected defendant’s arguments that: (1) D.R. Horton (and the NLRA) only protect “employees,” and not “former employees” such as plaintiff; (2) an employee can bring about the same changes in the workplace pursuing an individual claim as he or she can pursuing a claim collectively with other employees; and (3) D.R. Horton impermissibly conflicts with AT&T Mobility LLC v. Concepcion.
However, because the court held that the class waiver provision was severable from the arbitration agreement, the court severed the waiver and remanded the case to arbitration, potentially as a collective action.
Click Herrington v. Waterstone Mortgage Corp. to read the entire Opinion and Order.
Thanks to Dan Getman for the heads up on this recent decision.
E.D.N.Y.: Notice Language Advising Undocumented Immigrants That Their Immigration Status is Irrelevant Approved
Enriquez v. Cherry Hill Market Corp.
This case was before the court on the plaintiff’s motion for conditional certification. As discussed here, it is of interest, because of the language the court approved with regard to the Notice to be sent to the class. Specifically, among other things, the court ruled that a warning to potential opt-ins that they may have to participate in the case was unduly chilling and further held that it was appropriate to notify putative class members that their immigration status is irrelevant to their right to recover under the FLSA.
Discussing the latter issue, the court explained:
“The proposed notice informs potential plaintiffs, ‘You have a right to participate in this action even if you are an undocumented alien or if you were paid in cash.’ Not. of Motion, Ex. 3. The plaintiffs states that this information is necessary to reassure potential plaintiffs, many of whom will be ‘foreign-born workers who have little command of English [and] are probably unfamiliar with the American legal system.’ Reply Mem. of Law at 7. The defendants respond that it implies that there employment practices violated immigration and/or labor laws.”
Although the court toned down the language the plaintiff had proposed, ultimately it approved language clarifying that the putative class members’ immigration status was/is irrelevant:
“The Court agrees that the language appropriately corrects a possible assumption that the FLSA does not cover illegal immigrants or workers paid in cash. Its size and placement, however, are unnecessarily inflammatory. Plaintiffs are ordered to remove the language and, instead, add to the end of paragraph beginning “You may be owed payment …” that potential plaintiffs may be owed payment even if they were paid in cash and regardless of their immigration status, or words to that effect.”
Click Enriquez v. Cherry Hill Market Corp. to read the entire Memorandum and Order.
5th Cir.: Member of LLC Lacked Sufficient Day-to-Day Involvement In Operation of Nightclub to be “Employer” Under FLSA
Gray v. Powers
This case was before the Fifth Circuit on Plaintiff’s appeal of an Order granting an individual defendant summary judgment, having held that there were insufficient facts to render the individual defendant to be an “employer” subject to FLSA liability. Affirming the decision below, the Fifth Circuit held that the individual defendant- who was not involved in the day-to-day operations of the defendant nightclub as a member of the LLC that owned same- lacked sufficient involvement to be an “employer.”
According to the court it was undisputed that- after participating in the initial construction of the nightclub- the individual defendant in question (“Powers”) had little day-to-day involvement in the club’s operations:
“After completion of the construction, Powers was not involved in the day-to-day operation of the Pasha Lounge. Powers only visited the club on five or six occasions during the seventeen months the club was open for business. He denies that he supervised any employee, defined employee job duties, controlled work schedules, or maintained employment records. During his rare trips to the lounge, the bartenders would tell him how much they made in tips. Powers was, however, a signatory on PEG’s checking account, along with Kathleen and the club’s general manager, and he occasionally signed several pages of pre-printed checks.
Other members, Kathleen in particular, were much more involved in the operation of the club. Kathleen kept the books, was a signatory on the accounts, received nightly numbers, and served as the point of contact for the general manager. The members of PEG collectively made significant business decisions such as hiring John W. Ritchey, Jr. as the first general manager. Ritchey’s job duties included hiring and firing staff, handling promotions, setting operation hours, and supervising day-to-day operations. In Ritchey’s words, he was “in charge of pretty much everything that went on at the club.” Ritchey was later removed by the members of PEG because his salary was too expensive.
Appellant Gray was a bartender at Pasha Lounge from February to September 2007 and replaced Ritchey as general manager from March to September 2008. Gray asserts that while he was a bartender under Ritchey’s supervision, he and his fellow bartenders were not paid an hourly wage and were compensated solely by tips. Gray considered Ritchey to be his boss at that time because Ritchey hired him and defined his job duties. Though Gray asserts that Powers was another “supervisor,” Gray admitted in a deposition that Powers was not involved in the club’s day-to-day operations. Powers rarely visited the club, but on one visit he did tell Gray that he was doing a “great job.” Also, on two occasions Powers asked Gray to serve specific people while Powers was a patron at the club. Beyond these three instances, Gray could not remember any other occasion when Powers “directed” his work as a bartender. Gray contends, however, that Powers asked him to fill in as general manager after Ritchey was let go. Stephen disputes that fact because he allegedly enlisted Gray to fill in as general manager.”
After going through each element of the economic reality test, the court concluded that there was insufficient evidence that Powers was an “employer” under the FLSA:
“Applying the economic reality test to Powers, we reaffirm the district court’s conclusion that no reasonable jury could have found him to be an employer. The dominant theme in the case law is that those who have operating control over employees within companies may be individually liable for FLSA violations committed by the companies. An individual’s operational control can be shown through his power to hire and fire, ability to supervise, power to set wages, and maintenance of employment records. While each element need not be present in every case, finding employer status when none of the factors is present would make the test meaningless. We decline to adopt a rule that would potentially impose individual liability on all shareholders, members, and officers of entities that are employers under the FLSA based on their position rather than the economic reality of their involvement in the company. In this case, Powers was simply not sufficiently involved in the operation of the club to be an employer. The district court’s judgment is AFFIRMED.”
Click Gray v. Powers to read the entire decision.
D.N.J.: Absent Exercise of Discretion in Loading Trucks, Loader Not Subject to Motor Carrier Act (MCA) Exemption
Chellis v. New Century Transp., Inc.
This case was before the court on the defendant’s motion to dismiss the complaint for failure to state a claim. Defendant asserted that, on its face, plaintiff’s complaint demonstrated that plaintiff was exempt under the motor carrier act, because plaintiff pled that he was a truck loader. However, the court disagreed, citing plaintiff’s additional allegation that he did not exercise any discretion in loading the trucks.
Significantly, the Complaint alleged the following:
“(1) Plaintiff worked as a truck loader for Defendant. (Compl.¶ 16) Plaintiff’s duties consisted of executing load plans developed by his superiors. (Id. at ¶¶ 19–20) Plaintiff did not have responsibility for exercising his own discretion or judgment when loading. (Id. at ¶¶ 22–24) Despite working in excess of forty fours a week, Plaintiff was not paid overtime.”
Holding that Plaintiff’s allegations were sufficient, the court reasoned:
“To fall within the exemption, a loader’s duties must include “the proper loading of his employer’s motor vehicles so that they may be safely operated on the highways of the country.” 29 C.F.R. § 782.5(a). An employee has safety of operation duties when:
he has responsibility when such motor vehicles are being loaded, for exercising judgment and discretion in planning and building a balanced load or in placing, distributing, or securing the pieces of freight in such a manner that the safe operation of the vehicles on the highways in interstate or foreign commerce will not be jeopardized.
Id.
The parties’ disagreement stems principally from statutory construction. Defendant argues that the regulation is disjunctive. Therefore, Plaintiff need only have duties “in placing, distributing, or securing the pieces of freight” to fall within the exemption. Id.
Plaintiff argues that “for exercising judgment and discretion in planning” modifies subsequent clauses. Id. Merely placing freight on a truck does not fall within the exemption absent the responsibility for using discretion and judgment for such placement. Because Plaintiff alleges that he could not exercise discretion, he was not a loader as defined by the regulation.
Considering the staggering use of disjunctives and conjunctives in the same sentence, the disagreement is understandable. Although this Circuit has not addressed the issue, the balance of courts around the country tend to agree with Plaintiff. See, e.g., Lewis v. Eskridge Trucking Co., 2011 WL 4598189, *1 (11th Cir.2011) (emphasizing discretion and responsibility in analyzing the loader exemption); Vaughn v. Watkins Motor Lines, Inc., 291 F.3d 900, 904 (6th Cir.2002) (“the plaintiffs and [defendant] disagree as to whether these two dockworkers exercised the judgment and discretion necessary to be considered loaders.”); Shultz v. Kelley, 431 F.2d 1364, 1368 (10th Cir.1970) (a loader must “exercis[e] judgment and discretion in (1) planning and building a balanced load or (2) placing, (3) distributing, or (4) securing the pieces of freight.”). The Court agrees with this analysis.
Here, Plaintiff clearly alleges that he did not have responsibility for exercising judgment or discretion when loading the trucks. (See Compl. ¶¶ 22–26) Therefore, the exemption does not apply and the Motion will be denied.”
Click Chellis v. New Century Transportation, Inc. to read the entire Order Denying Defendant’s Motion to Dismiss.
W.D.N.Y.: Common Law Claims Not Preempted To the Extent They Provide a Remedy Not Available Under the FLSA
Gordon v. Kaleida Health
In an unusual procedural posture, this case was before the court on plaintiffs’ motion to remand their state common law claims, based on lack of subject matter jurisdiction. The court held that it had subject matter jurisdiction however, because of FLSA preemption considerations. As discussed here, the court held that common law claims seeking to recover straight-time compensation otherwise not covered under the FLSA are not preempted by the FLSA.
Discussing the issue the court reasoned:
“In many district court cases where this issue has arisen, the plaintiffs’ common law claims were brought in conjunction with FLSA claims, based on the same facts, and seeking the same relief. In such cases, most courts have had no trouble dismissing the common law claims as preempted to the extent recovery is available under the FLSA, even where the plaintiff also brought wage claims under a parallel state statute. See, e.g., Guensel v. Mount Olive Bd. of Educ., Civ. No. 10–4452, 2011 U.S. Dist. LEXIS 132102, at *19, 2011 WL 5599717 (D.N.J. Nov. 16, 2011) (common law claims that are “directly covered” by FLSA must be brought under the FLSA); DeMarco v. Northwestern Mem. Healthcare, Civ. No. 10–C–397, 2011 U.S. Dist. LEXIS 88541, at *17–18, 2011 WL 3510905 (N.D.Ill. Aug. 10, 2011) (unjust enrichment and other state common law claims seeking relief available under the FLSA are preempted); Bouthner v. Cleveland Constr., Inc., Civ. No. RDB–11–244, 2011 U.S. Dist. LEXIS 79316, at *21–22, 2011 WL 2976868 (D.Md. July 21, 2011) (although common law claim made no reference to FLSA, it was preempted where claim sought wages mandated by FLSA).
Two courts in this Circuit have expressly concluded that common law claims are preempted to the extent they seek recovery available under the FLSA, but are not preempted to the extent that state law provides a remedy not available under federal law. DeSilva v. N. Shore–Long Island Jewish Health Sys., 770 F.Supp.2d 497, 532–33 (E.D.N.Y.2011) (finding common law claims preempted by FLSA to extent they sought overtime wages, but not preempted to extent they sought straight-time pay not available under the FLSA); Barrus v. Dick’s Sporting Goods, Inc., 732 F.Supp.2d 243, 263 (W.D.N.Y.2010) (dismissing common law claims seeking unpaid overtime as preempted by FLSA, but allowing claim for unpaid straight time wages to go forward). Other district courts have held likewise. See, e .g., Monahan v. Smyth Auto., Inc., No. 10–CV–00048, 2011 Dist. LEXIS 9877, at *9–11, 2011 WL 379129 (S.D. Oh Feb. 2, 2011) (unjust enrichment claim not preempted where it was based on alleged failure to pay the state’s minimum wage, which was higher than FLSA minimum wage rate); Mickle v. Wellman Prods. LLC, No. 08–CV–0297, 2008 U.S. Dist. LEXIS 63697, at *10–11, 2008 WL 3925266 (N.D.Okla.2008) (while state statute created a distinct cause of action for overtime compensation, the plaintiffs’ common law claim seeking such relief was duplicative of remedies provided by the FLSA and was preempted).
The law on this issue is by no means settled—some courts have declined to find common law claims preempted where a state’s statute incorporates the FLSA’s minimum wage and/or overtime provisions, and others have dismissed entirely common law claims for which the FLSA provides only partial relief. However, I find the foregoing cases from within this Circuit persuasive. As the DiSilva court noted, the FLSA’s savings clause expressly provides that wage and hour actions may be brought under state wage statutes, “it says nothing about a party’s ability to pursue general common law claims that have no specific relevance to the labor law context.” 2011 U.S. Dist. LEXIS 27138, at *93 (emphasis in original).
Here, Plaintiffs common law claims are not brought in conjunction with any claim for relief under the FLSA or the NYLL. They refer generally to statutory law only as the basis for calculating damages. This vague reference to “state law” is not enough to draw purely common law claims into the ambit of the FLSA’s savings clause. Accordingly, to the extent Plaintiffs are seeking unpaid overtime wages that are available under the FLSA, their common law claims are preempted, and to the extent they are seeking straight-time wages for which no federal relief is available, they are not.”
Click Gordon v. Kaleida Health to read the entire Decision and Order.
4th Cir.: Intracompany Complaints Regarding FLSA Violations Are Protected Activity Within the Meaning of Anti-Retaliation Provision of 29 U.S.C. § 215(a)(3)
Minor v. Bostwick Laboratories, Inc.
Jafari v. Old Dominion Transit Management Co.
In two new opinions, one published (Minor) and one unpublished (Jafari) the Fourth Circuit confirmed that post-Kasten, intracompany complaints of FLSA violations are sufficient to trigger the protections of the anti-retaliation provision of 29 U.S.C. § 215(a)(3).
In Minor, the lower court had dismissed the plaintiff’s complaint premised on a violation of 215, holding that internal complaints, as opposed to those to a government agency, do not constitute protected activity. Reversing the lower court, the Fourth Circuit held that such intracompany complaints are indeed protected activity and thus, trigger the protections of 215.
Framing the issue the Fourth Circuit explained:
“The sole question presented by this appeal is whether an employee’s complaint lodged within her company—as opposed to a complaint filed with a court or government agency—may trigger the protection of the FLSA’s antiretaliation provision. This is an issue of first impression in this circuit.”
Initially the court noted that neither Kasten, nor any Fourth Circuit case law was directly on point. However, following the majority of circuits to have addresssed the issue, the court concluded that the statute was ambiguous as to this point and given the remedial nature of the FLSA such informal complaints should be protected.
After discussing the ambiguity in 215’s language regarding “filing” a complaint, the court reasoned:
“The Supreme Court in Kasten determined that oral complaints could constitute protected activity within the meaning of § 215(a)(3) based upon “functional considerations.” 131 S.Ct. at 1333. In light of the ambiguous nature of § 215(a)(3)‘s “filed any complaint” language, we find that these same functional considerations dictate that intracompany complaints qualify as protected activity within the meaning of the FLSA’s antiretaliation provision.
We first consider the basic goals of the FLSA. Consistent with other authority, we conclude that, because of the statute’s remedial purpose, § 215(a)(3) must be interpreted to include intracompany complaints.
The FLSA was enacted to combat “labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers.” 29 U.S.C. § 202(a). “The central aim of the Act was to achieve … certain minimum labor standards.” Mitchell v. Robert DeMario Jewelry, Inc., 361 U.S. 288, 292, 80 S.Ct. 332, 4 L.Ed.2d 323 (1960). To ensure compliance with the provisions enacted to serve this purpose, Congress “chose to rely on information and complaints from employees seeking to vindicate rights claimed to have been denied.” Id. It included the antiretaliation provision in recognition of the fact that “fear of economic retaliation might often operate to induce aggrieved employees quietly to accept substandard conditions.” Id. In light of these objectives, the Supreme Court has consistently held that the FLSA “must not be interpreted or applied in a narrow, grudging manner.” Tenn. Coal, Iron & R.R. Co. v. Muscoda Local No. 123, 321 U.S. 590, 597, 64 S.Ct. 698, 88 L.Ed. 949 (1944). We likewise recognized in Ball that where the statutory language permits, “we are instructed to read the FLSA to effect its remedial purposes.” 228 F.3d at 363–64.
With the statute’s purpose in mind, Kasten stated that “an interpretation [of § 215(a)(3) ] that limited the provision’s coverage to written complaints would undermine the [FLSA’s] basic objectives.” 131 S.Ct. at 1333. The Supreme Court further observed that such a limitation on the scope of the anti-retaliation provision would circumscribe flexibility in enforcing the FLSA. Id . at 1334. As a supporting point, the Supreme Court stated that “insofar as the antiretaliation provision covers complaints made to employers …, [limiting the scope of § 215(a)(3) ] would discourage the use of desirable informal workplace grievance procedures to secure compliance with the Act.” Id. Following this reasoning, we conclude that an interpretation that limits § 215(a)(3)‘s coverage to complaints made before an administrative or judicial body would overly circumscribe the reach of the antiretaliation provision in contravention of the FLSA’s remedial purpose. Allowing intracompany complaints to constitute protected activity within the meaning of § 215(a)(3), on the other hand, comports with the statute’s objectives as described by Congress’s findings and the Supreme Court’s interpretation of those findings.
Amici offer several persuasive policy arguments in support of this conclusion. They point out that protection of internal complaints encourages resolution of FLSA violations without resort to drawn-out litigation—and that failure to protect internal complaints may have the perverse result of encouraging employers to fire employees who believe they have been treated illegally before they file a formal complaint. Our sister circuits have voiced the same concerns in concluding that § 215(a)(3) protects intracompany complaints. See Valerio v. Putnam Assocs., Inc., 173 F.3d 35, 43 (1st Cir.1999) (“By protecting only those employees who kept secret their belief that they were being illegally treated until they filed a legal proceeding, the Act would discourage prior discussion of the matter between employee and employer, and would have the bizarre effect both of discouraging early settlement and creating an incentive for the employer to fire an employee as soon as possible after learning the employee believed he was being treated illegally.”).
Indeed, the majority of circuits to consider the question of whether intracompany complaints are protected activity within the meaning of “filed any complaint” have answered in the affirmative, basing their decisions on the FLSA’s remedial purpose.FN8 See, e.g., Hagan v. Echostar Satellite, LLC, 529 F.3d 617, 626 (5th Cir .2008) (“We adopt the majority rule, which allows an informal, internal complaint to constitute protected activity under Section 215(a)(3), because it better captures the anti-retaliation goals of that section.”); Lambert v. Ackerley, 180 F.3d 997, 1004 (9th Cir.1999) (en banc) (finding that § 215(a)(3) covered internal complaints based on its remedial purpose); Valerio, 173 at 42 (same); EEOC v. White & Son Enters., 881 F.2d 1006, 1011 (11th Cir.1989) (same); Love v. RE/MAX of Am., Inc., 738 F.2d 383, 387 (10th Cir.1984) (same); Brennan v. Maxey’s Yamaha, Inc., 513 F.2d 179, 181 (8th Cir.1975) (same); see also EEOC v. Romeo Cmty. Sch., 976 F.2d 985, 989 (6th Cir.1992) (holding that an employee’s complaints to her employer were sufficient to trigger protection of the FLSA’s antiretaliation provision without explaining its rationale). Cf. Brock v. Richardson, 812 F.2d 121, 124–25 (3d Cir.1987) (holding that, because of the FLSA’s remedial purpose, a retaliatory firing based on an employer’s belief that an employee had filed a complaint—even when he had not—was prohibited by § 215(a)(3)). Thus, we adopt the majority view by holding that the remedial purpose of the FLSA requires intracompany complaints to be considered protected activity within the meaning of its antiretaliation provision.
Supporting our conclusion is the Secretary of Labor and the EEOC’s consistent position that intracompany complaints are included within the meaning of “filed any complaint.” We afford agency interpretations that do not have the force of law, like agency manuals and litigation documents, respect to the extent that they possess the “power to persuade.” Christensen v. Harris Cnty., 529 U.S. 576, 587, 120 S.Ct. 1655, 146 L.Ed.2d 621 (2000) (quoting Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S.Ct. 161, 89 L.Ed. 124 (1944)). Factors we consider when determining whether an agency interpretation has the power to persuade include “the thoroughness evident in its consideration, the validity of its reasoning, [and] its consistency with earlier and later pronouncements.” Skidmore, 323 U.S. at 140; see also Cunningham v. Scibana, 259 F.3d 303, 306–07 (4th Cir.2001).
Here, the EEOC has set forth the position that intracompany complaints constitute “fil[ing] any complaint” within the meaning of § 215(a)(3) in the compliance manual it issues to field offices. 2 EEOC Compliance Manual § 8–II(B) & 8–II(B) n. 12 (2006). In addition, both the Secretary and the EEOC have argued in litigation that intracompany complaints are covered by the FLSA’s antiretaliation provision. See, e.g., Br. for the Sec. of Labor and the EEOC as Amici Curiae at 26–30; Br. for the Sec. of Labor as Amicus Curiae, Kasten v. Saint–Gobain Performance Plastics Corp., 570 F.3d 834 (7th Cir.2009) (No. 08–2820). Thus, although it is not determinative, because the Secretary and the EEOC have consistently advanced this reasonable and thoroughly considered position, it “add[s] force to our conclusion.” Kasten, 131 S.Ct. at 1335.
We conclude by emphasizing that our holding that intracompany complaints may constitute “fil[ing] any complaint” under § 215(a)(3) does not mean that every instance of an employee “letting off steam” to his employer constitutes protected activity. Kasten, 131 S.Ct. at 1334. To the contrary, “the statute requires fair notice” to employers. Id. To protect employers from unnecessary uncertainty, “some degree of formality” is required for an employee complaint to constitute protected activity, “certainly to the point where the recipient has been given fair notice that a grievance has been lodged and does, or should, reasonably understand that matter as part of its business concerns.” Id. Therefore, the proper standard for the district court to apply is the aforementioned test articulated in Kasten: whether Minor’s complaint to her employer was “sufficiently clear and detailed for a reasonable employer to understand it, in light of both content and context, as an assertion of rights protected by the statute and a call for their protection.” Id. at 1335.
Minor’s allegations here meet the standard we have articulated to the extent required to survive a motion to dismiss. The facts as alleged in her complaint indicate that Minor expressed her concerns regarding FLSA violations to the chief operating officer of her company in a meeting specifically called for that purpose. Minor also alleges that this executive-level employee agreed to investigate her claims. At this stage, these allegations are sufficient. We note again that we express no view as to whether Minor should ultimately prevail under the standard we have articulated. We simply hold that, on the facts alleged, her complaint survives a motion to dismiss.”
Click Minor v. Bostwick Laboratories, Inc. to read the entire published Opinion. Click Jafari v. Old Dominion Transit Management Co. to read the companion unpublished Opinion. Also of interest is the DOL/EEOC Amici Brief filed in Jafari.
2 New Decisions Regarding Enforcement of Arbitration Agreements in Context of FLSA Claims Reach Opposite Results
Recent weeks have brought more opinions regarding the issue of whether specific arbitration agreements are enforceable. However, as two recent opinions show, these decisions continue to be fact-specific in virtually all instances, and judge and/or state-law specific in others. In the first case, Carey v. 24 Hour Fitness USA Inc., relying on Texas state law, the Fifth Circuit affirmed a lower court’s decision holding that an arbitration agreement allowing the employer to unilaterally change the terms lacked the necessary consideration to render the agreement enforceable. In a second case, LaVoice v. UBS Financial Services, Inc., a court within the Southern District of New York examined a different arbitration-related issue- the substantive unconscionability of a collective action waiver- concluding that compelling a potentially high value FLSA claim to arbitration on an individual basis does not conflict with the substantive law regarding the FLSA’s collective action provisions. Significantly, the court’s conclusion in this regard appears to conflict with another recent holding discussed here, in which another court within the same district held that collective action waivers are unenforceable per se, because they prevent employees from vindicating their substantive statutory rights under the FLSA.
Carey v. 24 Hour Fitness USA Inc.
Law360 aptly summarized this decision as follows:
“The Fifth Circuit on Wednesday allowed a proposed overtime class action against 24 Hour Fitness USA Inc. to go forward, finding an arbitration agreement at issue contained an ‘escape hatch’ for the fitness chain that made it unenforceable.
In a unanimous, published opinion, the appeals court upheld a Texas federal court’s ruling that the arbitration agreement in 24 Hour Fitness’ employee handbook was illusory because it allowed the company to retroactively modify or terminate the agreement.
Because 24 Hour Fitness reserved the right to unilaterally adjust the conditions of employment — including those which required employees to arbitrate claims on an individual basis — the appeals court found that the arbitration agreement was invalid from the outset.
‘If a 24 Hour Fitness employee sought to invoke arbitration with the company pursuant to the agreement, nothing would prevent 24 Hour Fitness from changing the agreement and making those changes applicable to that pending dispute if it determined that arbitration was no longer in its interest,’ the panel said.
Click Carey v. 24 Hour Fitness USA Inc. to read the entire Fifth Circuit Opinion.
LaVoice v. UBS Financial Services, Inc.
In LaVoice, the court held that an arbitration agreement, requiring individual arbitration was enforceable, despite plaintiff’s argument that such an scheme would deprive plaintiff of substantive statutory rights to proceed collectively under the FLSA. Discussing the issue, the court reasoned:
“…LaVoice also argues that the arbitration agreements between him and UBS are unenforceable because they would preclude him from exercising his statutory rights. To support this position, LaVoice likens the class waivers in the instant case with those that were found unenforceable in the Amex line of cases. LaVoice also draws comparison between his circumstances and those of the plaintiff in Sutherland v. Ernst & Young LLP, 768 F.Supp.2d 547 (S.D.N.Y.2011).
The enforceability of a class action waiver in an arbitration agreement must be considered on a case-by-case basis “on its own merits, governed with a healthy regard for the fact that the FAA is a congressional declaration of a liberal federal policy favoring arbitration agreements.” Amex II, 634 F.3d at 199. Turning to the class waiver at issue and LaVoice’s specific circumstances, this Court finds that the “practical effect of enforcement of the waiver” in the instant case would not “preclude” LaVoice from exercising his rights under the statutes. Id. at 196. The Court comes to its finding that LaVoice’s statutory rights will not be precluded by enforcement of the class waiver after reviewing his submissions regarding: his estimated damages claim, his estimated attorneys’ fees, his estimated expert fees, his disinclination to pursue his claims individually, his counsel’s disinclination to pursue the claims individually, and his likelihood of success at arbitration.
Although LaVoice and Defendants contest the value of LaVoice’s overtime claim, in reaching its decision, the Court accepts the figure cited in LaVoice’s own opposition papers of overtime claims between $127,000 to $132,000. Aff. Jeffrey G. Smith in Supp. of Opp’n. to Mot. to Compel Arbitration at ¶ 5. Assuming this self-reported value of claims, the Court finds that LaVoice’s circumstances differ drastically on their face from those of the plaintiffs in either the Amex line of cases or Sutherland. Plaintiffs in those cases could each only claim de minimus damages of less than $6000.
With respect to the estimated attorneys’ fees, the Court finds that, unlike the arbitration agreement at issue in Sutherland, the arbitration agreements at issue in the instant case would permit LaVoice to recover an award of attorneys’ fees. Since the agreements authorize the arbitrator(s) to “award whatever remedies would be available to the parties in a court of law” and awards of attorneys’ fees are mandatory for the prevailing party under the FLSA, the agreements themselves crate no impediment to LaVoice’s recovery of fees. See Ex. 6 to Decl. of Matthew Levitan at 20; Ex. 10 to Decl. of Matthew Levitan at 3; and 29 U.S.C. § 216(b) (“The court in such action shall … allow a reasonable attorney’s fee to be paid by the defendant, and costs of the action.”) The instant case is therefore distinguishable from Sutherland and its consideration of attorneys’ fees in determining whether plaintiff’s claims were unarbitrable. See also Banus v. Citigroup Global Mkts., Inc., No. 09–7128, 2010 WL 1643780, at *10 n. 61 (S.D.N.Y. Apr.23, 2010) (enforcing class action waiver in arbitration agreement where plaintiff’s estimated recovery was $45,675.36 and attorney’s fees would be “at least $100,000.”)
The court also evaluated and rejected plaintiff’s claim that expert costs to be incurred would be prohibitive in an individual claim, whereas spreading the cost over a collective group would be more palatable and rejected same, in the context of plaintiff’s proffered argument that his counsel would be disinclined to pursue his claims on an individual basis by themselves.
The court concluded, “[i]n light of the foregoing, the Court finds that LaVoice has not met his “burden of showing the likelihood of incurring” such “prohibitively expensive” costs such that the class waiver provisions in the instant action would preclude him from bringing his claims against Defendants in an individual or collective capacity. Amex II, 634 F.3d at 197 (citing Randolph, 531 U.S. at 92.)”
Click LaVoice v. UBS Financial Services, Inc. to read the entire Memorandum and Order compelling the case to arbitration on an individual basis.
As more and more cases are decided following recent United States Supreme Court jurisprudence on arbitrability and class waiver issues, it’s becoming more and more clear that the results are very fact-specific to each case. Hopefully, higher courts will begin to weigh in on some of the broader issues and give some clarity in the near future.
N.D.Cal.: Life Insurance Broker Not a “Retail or Service Establishment;” 7(i) Retail Sales Exemption Inapplicable
Burden v. SelectQuote Ins. Services
This case was before the court on the defendant’s motion for summary judgment. As discussed here, Defendant, a life insurance agency, argued that plaintiffs, its life insurance brokers, were exempt from the FLSA’s overtime provisions pursuant to the so-called retail sales exemption. While the court held that defendant could make out 2 of the 3 elements required for application of the exemption, ultimately it held that the exemption was inapplicable because defendant lacked a retail concept.
Pursuant to Section 7(i), certain employees are exempt from the FLSA’s overtime provisions if three conditions must be met: (1) the employee must be employed by a retail or service establishment; (2) the employee’s regular rate of pay must exceed one and one-half times the applicable minimum wage for every hour worked in a workweek in which overtime hours are worked; and (3) more than half the employee’s total earnings in a representative period must consist of commissions. Here, the court held that the defendant could not satisfy element (1) and therefore the exemption did not apply.
Analyzing the issue, the court reasoned:
“Section 779.317 expressly identifies “insurance” as being among the “list of establishments to which the retail concept does not apply.” 29 C.F.R. § 779.317 (identifying: “Brokers, custom house; freight brokers; insurance brokers, stock or commodity brokers” and “Insurance; mutual, stock and fraternal benefit, including insurance brokers, agents, and claims adjustment offices.”) (emphasis added). SelectQuote acknowledges that “[i]nsurance” and “insurance brokers” are expressly identified in § 779.317, but nonetheless asserts that § 779.317 is inapposite because it is operating a “new type of business” that is “not covered by the Insurance Industry exclusion from the ‘retail concept’ in the FLSA regulations.” Mot. at 18.
As support for its position, SelectQuote relies principally on two out-of-circuit cases, which ostensibly concluded that a business lacking a retail concept under § 779.317 may nonetheless qualify for the retail or service exemption. Mot. at 18–19. In Hodgson v. Centralized Servs., Inc., 457 F.2d 824 (4th Cir.1972), the court held that an income tax preparation service qualified as a retail or service establishment under the FLSA, notwithstanding a prior DOL interpretation stating that “accounting firms” lacked the retail concept. Id., 457 F.2d at 827. In reaching its decision, the court noted that the DOL’S pre–1949 exclusion of “accounting firms” should not “arbitrarily embrace the unsophisticated business activities of the defendants in an area of service which came into being and had developed throughout the country only during the past decade.” Id.
In Selz v. Investools, Inc., No. 2:09–CV–1042 TS, 2011 WL 285801 (D.Utah Jan.27, 2011), the court ruled that a company that marketed products and services to educate individuals on how to personally invest in exchange markets online and aid them in doing so did not qualify as one of the specific establishments exempt from the retail exception. While noting that that § 779.317 specifies that educational institutions, finance companies and investment counseling firms lack a retail concept, the employer, “as a marketer of materials that teach and aid individuals to do their own financial investing, does not fit into the traditional concept of an educational institution, such as a for-profit university; a finance company, such as a bank; or an investment counseling firm.” Id. at *6 (emphasis added). The court concluded that “marketing tools to aid individuals in independently investing personal funds is its own industry” and therefore § 779.317 was not a bar to the FLSA exemption afforded under 29 U.S.C. § 317(i). Id .
SelectQuote claims that like the businesses in Hodgson and Selz, it too has developed a business model that is not encompassed in § 779.317. According to SelectQuote, its direct marketing approach “turned the life insurance industry on its head” by having its agents contact prospective customers by telephone instead of in person-more like the independent broker model traditionally existing in the property and casualty insurance business. Mot. at 2. In SelectQuote’s words, “One of the old adages in the insurance industry before 1985 was that property and casualty insurance was bought and life insurance was sold. SelectQuote’s insight was to change that paradigm so that life insurance too could just be bought by the average consumer.” Id.
SelectQuote’s self-aggrandizing arguments for avoiding the preclusive effect of § 779.317 are unavailing. In both Hodgson and Selz, the type of businesses operated by the defendants did not previously exist. In Hodgson, the court noted that the defendant’s tax preparation service had then only come into existence within a relatively recent period of time. 457 F.2d at 827. Likewise, in Selz, the court focused on the fact that the defendant’s business of selling do-it-yourself investment materials did not fall under the rubric of a bank, finance company or educational institution. 2011 WL 285801, at *6. In contrast, SelectQuote’s business bears none of the hallmarks of a new type of business establishment. Although SelectQuote has changed the method by which an agent sells life insurance—namely, directly by telephone instead of face-to-face—the fact remains that SelectQuote is still selling life insurance.
Moreover, SelectQuote’s own statements purporting to explain why its business supposedly is so revolutionary underscores the logical flaws in its argument. Section 779.317 identifies “Insurance” and “insurance brokers”—not “life insurance” or “term life insurance”—as establishments lacking a retail concept. See 29 C.F.R. § 779.317. Ironically, what SelectQuote claims to be “new” is not new at all; rather, as SelectQuote itself acknowledges, it simply is employing direct marketing methods that have long been used in the property and casualty insurance business. Singh Decl. ¶ 5. In other words, SelectQuote has made life insurance sales more like the traditional insurance brokerages, which clearly are within the scope of § 779.317. In Hodgson and Selz, the defendants changed a specifically-listed industry so fundamentally as to distinguish it from an industry listed in section 779.317. See Selz, 2011 WL 285801, at *6; Hodgson, 457 F.2d at 827. The logic of those cases does not apply in cases such as the present, where a company simply has changed its business to be more like a business which indisputably falls within the scope of § 779.317. For these reasons, the Court finds that SelectQuote falls within the insurance brokerage industry that section 779.317 finds to lack the requisite retail concept to qualify for an exemption from the FLSA’s overtime requirements.
As an alternative matter, SelectQuote argues that the Court should decline to apply § 779.317 on the ground that it lacks a rational basis for concluding that insurance establishments are not exempt as a retail or service establishment. Mot. at 20–22. According to SelectQuote, “[s]ection 779.317 is an ‘antiquated interpretation’ that does not take into account the fundamental changes over the past four decades regarding what is considered a ‘retail or service establishment,’ and it should not preclude SelectQuote from applying the section 7(i) exemption to Burden.” Id. at 22.
To support its position, SelectQuote points to cases where courts have declined to defer to the DOL’s list of non-retail establishments set forth in § 779.317 where there is no discernable rational basis for the DOL’s determination that type of business lacks a retail concept. See Martin v. The Refrigeration Sch., Inc. ., 968 F.2d 3 (9th Cir.1992) (holding that there was no rational basis for § 779.317‘s distinction that “[s]chools (except schools for mentally or physically handicapped or gifted children)” lack a retail concept); Reich v. Cruises Only, Inc., 1997 WL 1507504, at *5 (M.D.Fla. June 5, 1997) (finding that there was no rational basis for the DOL’s inclusion of “[t]ravel agencies” as establishments lacking a retail concept). However, these cases are distinguishable in that they did not involve the insurance industry. Moreover, the Supreme Court has held that the inclusion of financial companies, including insurance establishments, in § 779.317 is proper. See Mitchell, 359 U.S. at 290–91.
In light of the above, the Court finds that § 779.317 is a persuasive embodiment of the Department of Labor’s “body of experience and informed judgment.” See Skidmore, 323 U.S. at 140. The Court further finds that SelectQuote has not shown “plainly and unmistakably” that Burden’s exemption was within the “terms and spirit” of the FLSA. See Arnold, 361 U.S. at 392. As an insurance broker, SelectQuote is not a “retail or service establishment” and thus is not exempt from the FLSA’s overtime requirements. See 29 U.S.C. § 207(a); 29 C.F.R. § 779.317. Therefore, SelectQuote is not entitled to summary judgment of Burden’s second cause of action. See Fed.R.Civ.P. 56(a).”
Click Burden v. SelectQuote Ins. Servicesto read the entire Order Granting in Part and Denying in Part Defendant’s Motion for Summary Judgment. For further information on the the 7(i) exemption generally, see DOL Fact Sheet #20: Employees Paid Commissions By Retail Establishments Who Are Exempt Under Section 7(i) From Overtime Under The FLSA.
S.D.Fla.: Defendants Did Not Moot FLSA Case By Tender of Unpaid Wages and Liquidated Damages Without Attorneys Fees and Costs
Diaz v. Jaguar Restaurant Group, LLC
In the first post-Dionne II case, a court in the Southern District has denied an FLSA defendants’ motion to dismiss based on tender of unpaid wages and liquidated damages, absent payment of attorneys fees and costs. The bizarre procedural history involved the defendants “tender” of wages and liquidated damages, only after prevailing at trial, and reversal at the Eleventh Circuit due to the trial court’s order permitting the defendants to amend their answer to assert a previously unpled exemption during the trial.
The Order reads in part:
“To a great extent, the pending motion to dismiss has now been rendered moot by the Eleventh Circuit’s substitute opinion entered in the case of Dionne v. Floormasters Enterprises, Inc., No. 09-15405 (11th Cir. Jan. 13, 2012), which clarified that the Court’s opinion in that case is limited to its very narrow facts and, specifically, requires a concession of mootness and does not apply to the tender of full payment of amounts claimed by the employee in a FLSA case before trial or after judgment. The pending motion is based entirely upon a proposed extension of the Court’s now-withdrawn original opinion. Moreover, other cases that considered the issues raised here rejected attempts to expand the scope of the original opinion. See, e.g., Tapia v. Florida Cleanex, Inc., No. 09-21569 (S.D. Fla. Oct. 12, 2011) (Ungaro, J., D.E. 67, collecting cases). Judge Ungaro’s opinion has now been sustained by the Eleventh Circuit on rehearing. And, even under the original panel opinion, the Court could not possibly find that Defendant’s unilateral actions taken after a trial and an appeal rendered Plaintiff’s claim for damages and attorneys’ fees moot. But, in any event, the entire issue is now moot for purposes of this case.”
Click Diaz v Jaguar Restaurant Group, LLC to read the entire Order (contained in the Docket Sheet for the case at Docket Entry 108).
Thanks to Rex Burch for the head’s up on this Order.
D.Minn.: Where Agreement Silent As to Collective Action, Case May Proceed on Collective Basis in Arbitration
Mork v. Loram Maintenance of Way, Inc.
This case was before the court on the defendant’s motion to compel arbitration on an individual basis. While, the parties were in agreement that the case should be remanded to arbitration, the salient issue before the court was whether the arbitration agreement- silent on the issue of collective/class proceedings- allowed for collective treatment of the case. The court held that the parties had agreed to collective treatment of claims by the agreement’s silence. Thus, the case was remanded to arbitration, but to be treated as a collective action.
Initially the court held that, based on the absence of clear authority one way or another from the Supreme Court, the court had the authority to decide whether the case could proceed on a collective basis. Having made this decision, it proceeded into its analysis.
Discussing the standard it would apply, the court explained:
“The scope of an arbitration agreement is determined with reference to the agreement of the parties as evidenced by the terms of “the arbitration agreement itself or [based on] some background principle of contract law that would affect its interpretation.” See AT & T Mobility LLC v. Concepcion, 131 S.Ct. 1740, 1750 (2011). The Court must “give effect to the contractual rights and expectations of the parties.” Stolt–Nielsen, 130 S.Ct. at 1774 (citation omitted); see Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth, Inc., 473 U.S. 614, 626 (1985) (“as with any other contract, the parties’ intentions control”). Imposition of a particular type of arbitration cannot be based solely “on policy judgments.” Concepcion, 131 S.Ct. at 1750. Like any contract dispute, however, ambiguities in the agreement must be construed against the drafter. See, e.g., Advantage Consulting Group, Ltd. v. ADT Sec. Sys., Inc., 306 F.3d 582, 588 (8th Cir.2002).
In facing the question of whether to compel collective versus individual arbitration, the Court must therefore determine what the parties agreed to in the Arbitration Clause. A mere agreement to arbitrate, without more, does not imply agreement to collective arbitration. Cf. Stolt–Nielsen, 130 S.Ct. at 1775. This approach is consistent with Eighth Circuit precedent in the context of class arbitrations, Dominium Austin Partners, L.L.C. v. Emerson, 248 F.3d 720, 728–29 (8th Cir.2001), and consolidation of individual arbitrations, Baesler v. Cont’l Grain Co., 900 F.2d 1193, 1195 (8th Cir.1990). In Emerson and Baesler, the Eighth Circuit held that an arbitration agreement must provide for the type of arbitration which is sought to be compelled by the Court.
Loram urges a restrictive reading of Baesler, Emerson, and Stolt–Nielsen which would require explicit reference to, and acceptance of, collective arbitration in order for Mork’s claim to proceed on a collective basis. Those cases do not stand for such a strict standard. In Stolt–Nielsen, the Supreme Court’s statement that an intention to authorize class arbitration cannot be “infer[red] solely from the fact of the parties’ agreement to arbitrate,” Stolt–Nielsen, 130 S.Ct. at 1775 (emphasis added), indicates that such an intention may be inferred and need not be explicitly stated. The majority in Stolt–Nielsen therefore “[did] not insist on express consent to class arbitration.” Id. at 1783 (Ginsburg, J., dissenting). Accordingly, “Stolt–Nielsen does not foreclose the possibility that parties may reach an ‘implicit’—rather than express—‘agreement to authorize class-action arbitration.’ “ Jock v. Sterling Jewelers Inc., 646 F.3d 113, 123 (2d Cir.2011); see Jones v. St. Paul Cos ., Inc., 495 F.3d 888, 893 (8th Cir.2007) (“[F]ederal courts are bound by the Supreme Court’s considered dicta almost as firmly as by the Court’s outright holdings, particularly when … [the dicta] is of recent vintage and not enfeebled by any [later] statement.”) (internal quotation marks and citations omitted).
In sum, the question before the Court is not whether the Arbitration Clause used the precise words “collective arbitration.” Rather, the Court must determine whether the Arbitration Clause evinces sufficient indicia of agreement between the parties that a claim within its scope may proceed on a collective basis. In doing so, the Court must keep in mind that Loram drafted the language of the Arbitration Clause and, therefore, that ambiguities must be construed against it. Advantage Consulting, 306 F.3d at 588.
The Court notes that the test from Stolt–Nielsen stated here may be more stringent that the appropriate test for contracts of adhesion. See Stolt–Nielsen, 130 S.Ct. at 1783 (Ginsburg, J., dissenting) (“[T]he Court apparently spares from its affirmative-authorization requirement contracts of adhesion presented on a take-it-or-leave-it basis.”). Because the Court concludes that the Arbitration Clause does affirmatively authorize collective arbitration, there is no need to address whether the CAA was a contract of adhesion and therefore subject to a less stringent standard. The Court notes, however, that the parties here, unlike those in Stolt–Nielsen, are not both “sophisticated business entities” with comparable bargaining power, see id. at 1775, and the CAA appears to have been a “take-it-or-leave-it” boilerplate contract.”
The court then applied its standard and held that the silence of the parties on the collective issue demonstrated the indicia that the parties agreed to collective arbitration:
“While the parties distinguish between “express” and “implied” agreement to collective arbitration, as discussed above, the relevant question is whether there exists sufficient indicia that the parties agreed to undertake collective arbitration in the event of an employment dispute. While the Arbitration Clause does not refer explicitly to collective claims, the Court concludes that it does authorize such claims to proceed before an arbitrator.
To begin, the Arbitration Clause applies to “claims or disputes of any nature arising out of or relating to the employment relationship” and “statutory claims … arising out of or resulting from [Mork’s] employment with Loram.” (CAA ¶ 8 (emphasis added).) Mork’s claim that he and similarly situated coworkers were deprived of overtime pay is undisputedly related to “the employment relationship” and his FLSA claim is “statutory.” An action arising from FLSA violations “may be maintained against any employer … in any Federal or State court of competent jurisdiction by any one or more employees for and in behalf of himself or themselves and other employees similarly situated.” 29 U.S.C. § 216(b) (emphasis added). Thus, Mork has a statutory right to bring a FLSA claim on behalf of himself and similarly situated Field Application Technicians, and such a claim arises out of his employment relationship with Loram.
Loram contends that Mork’s ability to bring a claim on behalf of similarly situated employees is foreclosed because the Arbitration Clause’s references to potential arbitral parties include only Loram and Mork. For example, the Arbitration Clause provides that the arbitrator will have “exclusive authority to resolve any dispute or claim relating to, arising out of, or resulting from my employment with Loram” and the “statutory claims” covered by the Arbitration Clause are those “arising out of or resulting from my employment with Loram or the formation or the termination of my employment with Loram.” (CAA ¶ 8 (emphasis added).) These statements, Loram argues, show that the Arbitration Clause does not authorize collective arbitrations.
The Court is not persuaded that the Arbitration Clause’s particular reference to disputes between Mork and Loram must be read to preclude a collective claim. Mork’s FLSA claim is no less a claim “arising out of [his] employment with Loram” because it implicates similarly situated employees. The FLSA claim remains “his.” Viewed in even the most charitable light, Loram’s argument only creates some amount of ambiguity in the Arbitration Clause—ambiguity that must be resolved in Mork’s favor. Advantage Consulting, 306 F.3d at 588.
The conclusion that the Arbitration Clause permits collective arbitration is also supported by the contrast between its broad delegation of “any claims and disputes” to arbitration and its exclusion of only “claims or disputes [arising out of the CAA], or the breach, termination or invalidity thereof.” (CAA ¶ 8.) By negative implication, collective arbitration—a type of arbitration not expressly excluded—can be presumed to be covered by the wide ranging terms of the Arbitration Clause, particularly in light of the factors already discussed.
The Court further notes that the Arbitration Clause provides that arbitration be conducted in accordance with model rules provided by the American Arbitration Association (“AAA”) “in force at the time of the claim or dispute” and that the AAA “shall administer any such arbitration.” (CAA ¶ 8.) The AAA’s “Policy on Class Arbitrations” states that the AAA will “administer demands for class arbitration … if (1) the underlying agreement specifies that disputes arising out of the parties’ agreement shall be resolved by arbitration in accordance with any of the Association’s rules, and (2) the agreement is silent with respect to class claims, consolidation or joinder of claims.” See American Arbitration Association, Policy on Class Arbitrations, July 14, 2005, available at http://www.adr.org/sp.asp?id=25967. Even as interpreted by Loram, the Arbitration Clause in this case satisfies both criteria.
While this AAA policy was promulgated after the execution of the Arbitration Clause, the parties here agreed to be bound by the AAA rules in force “at the time of the claim or dispute.” (CAA ¶ 8.) The parties thus intended to be bound by future iterations of those rules. Loram’s decision to follow and abide by AAA rules therefore lends further support to the Court’s conclusion that the Arbitration Clause authorizes collective arbitration.
It is important to note that Mork has not moved the Court to consolidate otherwise independent actions into a single proceeding as was the case in Baesler, 900 F.3d at 1194–95. Rather, Mork seeks to proceed with a single, statutorily prescribed collective claim. Consolidation is a method by which a Court may efficiently resolve otherwise legally independent claims which happen to share a common question of law or fact. See Fed.R.Civ.P. 42(a). A FLSA collective action, in contrast, is a mechanism in which one claim can vindicate the rights of many. If Mork were seeking consolidated treatment of independent claims brought by employees, the Court would hesitate in considering those claims as “arising out of or resulting from [Mork’s] employment with Loram.” (See CAA ¶ 8.)
The Court also notes that some of the concerns raised by the Supreme Court about class arbitration are not present in the sort of collective arbitration sought by Mork. For one, a FLSA collective action is unlike a class action under Rule 23 of the Federal Rules of Civil Procedure because similarly situated employees must always “opt-in” to a FLSA action. See 29 U.S.C. § 216(b). Worries about an arbitrator “adjudicat[ing] the rights of absent parties” without affording them the full panoply of protections provided in court are therefore greatly diminished. See Stolt–Nielsen, 130 S.Ct. at 1776.
Finally, while fully cognizant that policy judgments may not be dispositive in this legal analysis, see Concepcion, 131 S.Ct. at 1750, the Court would be remiss if it did not briefly address the consequences of adopting a rule that an arbitration agreement cannot allow for collective or class arbitration except where the agreement explicitly uses and ratifies those precise terms. Such a rule would lead to great uncertainty, calling into question the countless arbitration agreements that have been executed in the shadow of a less stringent rule. Moreover, the adoption of such a rule would likely prevent the vindication of workers’ basic rights under the FLSA. See Sutherland v. Ernst & Young LLP, 768 F.Supp.2d 547, 553–54 (S.D.N.Y.2011).”
Click Mork v. Loram Maintenance of Way, Inc. to read the entire Memorandum of Law and Order.
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