United States: 7th Circuit Issues Ruling That Waiver Of Statutory Rights Under FLSA In Collective Bargaining Agreement Must Be Clear And Unmistakable

On May 15, 2017, the Seventh Circuit issued its ruling in Vega v. New Forest Home Cemetery, LLC, finding that an employee was not barred from bringing a Fair Labor Standards Act ("FLSA") claim in a judicial forum, despite his failure to exhaust the grievance procedure in the applicable collective bargaining agreement ("CBA").

Background

In the Vega case, Plaintiff was a seasonal employee at New Forest Home Cemetery in Illinois and a member of the Service Employees International Union. When Plaintiff was terminated in June 2015, he alleged that the Company failed to pay him for hours that he worked during his last two weeks of employment. The Company asserted it was unsure how to legally pay Plaintiff after discovering that he did not have a valid Social Security number. Plaintiff claimed that after unsuccessfully attempting to file a grievance against the Company, he was left with no choice but to file a lawsuit against the Company for its alleged failure to comply with FLSA's minimum wage requirements.

District Court Finds That Plaintiff Was Required To Exhaust Grievance And Arbitration Procedure Before Litigating FLSA Claim

The applicable collective bargaining agreement ("CBA") stated that employees must utilize the mandatory grievance and arbitration procedure to resolve grievances, which are defined to include claims or disputes concerning pay. The Company moved to dismiss the complaint on grounds that Plaintiff failed to exhaust the grievance procedure in the CBA before filing his lawsuit. The U.S. District Court of the Northern District of Illinois agreed with the Company's position and entered judgment in favor of the Company.

Seventh Circuit Reverses District Court's Decision

The Seventh Circuit reversed the District Court's decision, finding that the District Court had failed to distinguish between Plaintiff's contractual rights under the CBA and his statutory rights under the FLSA. The Court held Plaintiff was not required to utilize the CBA's grievance and arbitration procedure before filing suit under the FLSA. As explained by the Seventh Circuit, if Plaintiff was trying to enforce one of his rights under the CBA (for example, a contractual right to receive double time pay for weekend work), he would have been required to file a grievance over the dispute. However, because Plaintiff filed suit to enforce a statutory right under the FLSA, he was only required to arbitrate his statutory claim if the CBA clearly and unmistakably waived his right to bring his claim directly in court. Further, the Seventh Circuit found that because there is no mention of the FLSA anywhere in the CBA and the term grievance could be interpreted to mean contractual disputes over pay, the CBA did not make clear that statutory claims must be arbitrated first. Thus, the Seventh Circuit held that there was no clear and unmistakable waiver of Plaintiff's right to file an FLSA claim directly in court.

Takeaways For Employers

This case provides several reminders for employers in the process of negotiating collective bargaining agreements:

  • If a court is going to uphold a waiver of an employee's right to litigate a statutory claim in court, the waiver in the collective bargaining agreement must be explicit.
  • The best strategy for employers who seek to require arbitration over statutory claims is to include language in a collective bargaining agreement that specifically references the statutory claims that the employer would like to subject to mandatory arbitration.
  • Before including a waiver of an employee's right to litigate a statutory claim in a collective bargaining agreement, employers must ensure that the statute itself does not prohibit mandatory arbitration over claims arising under the statute.

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