United States: Supreme Court Will Not Hear Case Involving Waiver (In A Severance Agreement) Of FLSA Collective Action Participation

In a significant ruling (or lack of same) the US Supreme Court has declined to review an appellate court decision that held that employees could pursue a Fair Labor Standards Act collective action even though they signed severance agreements that included collective action waivers. The Sixth Circuit had held that as the severance agreements did not contain arbitration provisions, the employees could still become members of a class action. The case is entitled KeHE Distribs., LLC v. Killion. (761 F.3d 574, 23 WH Cases2d 16 (6th Cir. 2014).

The employer contended that the Sixth Circuit ruling conflicted with the decisions of seven other federal appellate courts as well as the Supreme Court. The Company argued that the Sixth Circuit misread those decisions as relying on the Federal Arbitration Act. In fact, the Company argued, these Courts of Appeals actually ruled that the FLSA did not create substantive rights to collective lawsuits that employees were legally foreclosed from waiving as a quid pro quo for severance compensation (i.e. consideration).

The plaintiffs countered by asserting that there no split existed between the Circuits because the precedent relied upon by KeHE involved collective action waivers in arbitration agreements that foreclosed class claims in arbitration. The plaintiffs observed that enforcement of those class action waivers vindicated an "emphatic federal policy in favor of arbitral dispute resolution." This set of circumstances was not at work in this case, according to the plaintiffs.

The Sixth Circuit took the position that the other decisions all involved class/collective action waivers engrafted into arbitration agreements, which implicated the Federal Arbitration Act. The defendant countered by asserting that these other decisions involved interpretation of the FLSA, rather than the Federal Arbitration Act. The Company argued that these other federal courts found nothing "in the text, legislative history or purpose of the FLSA" to suggest Congress "intended to confer a non-waivable right" to class litigation of FLSA claims." The Company claimed that none of the other decisions turned on anything unique about arbitration.

The Takeaway

I agree with the Company when it asserted to the Court that individual litigation will not preclude effective vindication of an employee's FLSA rights, although it could get expensive. As the Supreme Court, "the fact that it is not worth the expense involved in pursuing a statutory remedy does not constitute the elimination of the right to pursue that remedy." I do not believe that waiver is not barred simply because a statute allowed for a class or collective action and several federal courts have ruled that if an individual could opt into an FLSA collective action, then that same person could choose (voluntarily) to waive participation in class suits under the statute.

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