The Second Circuit recently ruled that the Fair Labor Standards Act ("FLSA") does not prohibit the enforcement of class action waivers in arbitration agreements with employees, even if the waivers remove the financial incentive for individual employees to pursue claims. In doing so, the Second Circuit joined the Fourth, Fifth, and Eighth Circuits in allowing waiver of FLSA collective action claims.
In Sutherland v. Ernst & Young LLP, the plaintiff
filed a class action for unpaid overtime wages, despite an
arbitration agreement barring class or collective action
arbitration. The defendant moved to compel arbitration. The
plaintiff claimed that requiring individual arbitration would
impermissibly prevent her from "effectively vindicating"
her rights under the FLSA and New York state law. The plaintiff
argued that the cost of pursuing an individual claim, estimated at
approximately $200,000, would far exceed her potential recovery,
which was less than $2,000.
The Second Circuit rejected the plaintiff's contention that the
FLSA creates a right to bring a collective action that cannot be
waived. Rather, the court found that the FLSA does not contain a
"contrary congressional command" that prevents the
enforcement of a class action waiver provision in an arbitration
agreement. Accordingly, the Second Circuit concluded that the
waiver of collective action claims is permissible under the
FLSA.
Sutherland represents a victory for employers in the fight
over enforcement of class action waivers. It joins the growing body
of cases upholding the use of class action waivers for various
employment claims. For employers wishing to avoid class or
collective actions, Sutherland makes it easier to enforce
carefully crafted class action waivers according to their
terms.
Originally published on the Employer's Law Blog
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