On October 4, 2016, the Fifth Circuit in Reyna v. International Bank of Commerce
instructed district courts that when the issue of arbitrability is
raised in a prompt motion to compel, it should be decided at the
outset of the litigation—even prior to deciding conditional
certification in FLSA collective actions. Reyna builds
upon the Fifth Circuit's recent decision in Kubala v. Supreme Production Services,
Inc., ensuring that courts adhere to the strong federal
policy favoring arbitration.
Carlos Reyna ("Reyna") brought a collective action
under the FLSA against International Bank of Commerce
("IBC") contending that IBC failed to properly pay
overtime to its bank tellers. IBC moved to dismiss the complaint
or, in the alternative, to compel arbitration of Reyna's claim.
The district court denied the motion to compel "concluding
that it could not consider the applicability of any arbitration
agreement until later in the certification process for a FLSA
IBC appealed under 9 U.S.C. § 16(a)(1)(C), which provides
for immediate appeal of an order denying a motion to compel
arbitration. The Fifth Circuit reversed and held that "the
district court was required to address the arbitrability of
Reyna's claim at the outset of the proceedings, prior to
considering conditional certification." The court reasoned:
"To hold otherwise would present a justiciability issue: a
court could conditionally certify a collective action solely on the
basis of a claim that the plaintiff was bound to arbitrate and was
therefore barred from bringing in court in the first
Reyna neither disputed that he had entered into the agreement
nor raised any challenges to its validity. His only argument,
raised for the first time on appeal, was that the arbitration
agreement did not apply to FLSA collective actions because it
explicitly referred only to "class actions." In a
footnote, the court stated it considered this argument waived.
Regardless, it would be a dispute over scope—an issue that
was explicitly delegated to the arbitrator in the arbitration
agreement, along with the threshold question of arbitrability.
Accordingly, the Fifth Circuit reversed the district court's
judgment and remanded with instructions to refer the dispute to
arbitration. This opinion reinforces the "national policy
favoring arbitration" and bodes well for employers seeking to
enforce arbitration agreements entered into with their employees.
Reyna reminds us that employers facing collective actions
should immediately investigate whether an arbitration agreement
exists and, if so, promptly move to compel arbitration in order to
foreclose the possibility of a premature motion for conditional
certification. Reyna provides another lesson for employers
when drafting arbitration agreements: it is best practice to
explicitly state applicability to both class and
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