United States: Fifth Circuit Addresses Notices Of Collective Action For Those Who Signed Arbitration Agreements Requiring Only Individual Claims

The intersection of Fair Labor Standards Act (FLSA) collective action procedures and employee arbitration agreements waiving aggregate actions has led to differing approaches among the district courts. In JPMorgan Chase & Co. (Case No. 18-20825, decided Feb. 21, 2019), the Fifth Circuit found that a district court does not have "discretion to send or require notice of a pending FLSA collective action to employees who are unable to join the action because of binding arbitration agreements." And the same prohibition applied to requiring the employer to give contact information for those employees. Slip op. at 13 and n.23.

The Background

The petition for writ of mandamus related to an FLSA action filed by Shannon Rivenbark against JPMorgan Chase & Co. (Chase) alleging that the company had violated the statute by failing to compensate her and other call center employees for "off-the-clock" work they performed.

Plaintiffs sought to conditionally certify a collective action that would have included approximately 42,000 current and former call center employees and have the court send notice to all putative collective members. According to Chase, about 35,000, or 85 percent, of those putative members had waived their right to proceed collectively by signing arbitration agreements.

Chase also countered that the massive notice to those with arbitration agreements would be "inconsistent" with the agreements and the Federal Arbitration Act. Plaintiffs did not deny that some employees signed arbitration agreements with collective action waivers and maintained that they did not wish to challenge the agreements. Indeed, they argued that ultimately some employees would arbitrate and others try their claims in court.

Nevertheless, on Dec. 10, 2018, the district court conditionally certified the collective action, including 35,000 workers with arbitration agreements. The certification was based on the questionable rationale that "the Court cannot determine that there is no possibility that putative class members will be able to join the suit until Defendant files a motion to compel arbitration against specific individuals."

So the court ordered Chase to send notice to putative class members via U.S. mail and email and to provide contact data for all 42,000 putative collective members within a two-week period.

The Fifth Circuit's Analysis

Putative collective members must opt in to an FLSA action, unlike in a Rule 23 class action. But the appellate court acknowledged that the opinion in Hoffman-La Roche Inc. v. Sperling, 493 U.S. 165, 169 (1989), while giving courts discretion as to opt-in notices for FLSA actions, did not explain whether employees covered by arbitration agreements with aggregate action waivers are "potential plaintiffs."

The Fifth Circuit focused on the purpose of giving notice in the collective action setting – it was to promote the "efficient resolution in one proceeding of common issues." But alerting those "who cannot ultimately participate in the collective 'merely stirs up litigation,'" the court said, citing Hoffman-La Roche 493 U.S. at 174.

And if evidence demonstrates that the employee has entered into an enforceable arbitration agreement, "it is error for a district court to order notice to that employee as part of any sort of certification." Slip op. at 11. Otherwise, the employee may receive the same type of notice as other workers.

While the district court erred in ordering notice when binding arbitration agreements were present (and demonstrated anti-arbitration sentiments), the appellate court found there was not a right to mandamus. Slip. op. at 12-13. Instead, the Fifth Circuit panel addressed the pertinent legal issues and instructed the lower court to revisit its decision based on its published opinion.

From a broader perspective, Chase reflects the lower courts' uncertainty in dealing with putative class members who signed arbitration agreements in the FLSA collective action environment.

The Bottom Line:

District courts have no discretion to require notices of an FLSA collective action (or to require the employer to provide contact information) when the employee cannot join the action due to an enforceable arbitration agreement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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