Have you (or others at your company) considered using mandatory arbitration agreements with your employees? The idea is to require an employee who ends up in an employment dispute to handle that dispute before an arbitrator, rather than by filing a lawsuit. But are these agreements valid and enforceable? A recent decision by the Eleventh Circuit Court of Appeals (which handles cases from all federal courts in Georgia, Alabama and Florida) has a lot to say about the overall effectiveness and enforceability of mandatory arbitration agreements.
Last week, the Eleventh Circuit joined four other Circuit courts in holding that an arbitration agreement that waives an employee’s ability to participate in a “collective action” (a little different than but similar to a class action) brought under the Fair Labor Standards Act (FLSA) (the federal wage and hour law) is enforceable under another law known as the Federal Arbitration Act (FAA).
In the case of Walthour et al. v. Chipio Windshield Repair, LLC et al., a group of window repairers originally filed suit against their employer in federal court in Georgia for allegedly failing to pay them overtime wages. The employer tried to take the case out of court because the employees had signed mandatory arbitration agreements. In line with an increasingly popular trend among employers, the arbitration agreement also included a waiver of the employees’ right to take part in a class or collective action (allowing each one to only bring an individual claim). The employees opposed the effort to force them out of court and into individual arbitrations, arguing that their right to file a collective action under the FLSA was a non-waivable, substantive legal right and that the arbitration agreements were invalid because they purported to waive that right.
Following a recent series of pro-arbitration U.S. Supreme Court decisions, the Eleventh Circuit found that the arbitration agreement’s waiver of each employee’s ability to participate in a collective FLSA action was legal and enforceable under the FAA. The court noted that the FAA embodies a broad federal policy favoring arbitration agreements and seeks to relieve congestion in the courts by providing parties with an alternative method for dispute resolution that is speedier and less costly than litigation. In accordance with this federal policy favoring arbitration, the Eleventh Circuit ruled that courts are obligated to enforce arbitration agreements as written absent a “contrary congressional command.” Looking to the FLSA, the FAA, and other appellate court decisions across the country, the Eleventh Circuit held that even though the FLSA allows for collective actions to be brought, that right is not substantive, and it can be waived by employees – and it was in this case.
In an upcoming article in Troutman Sanders LLP’s Employment & The Law newsletter, we will discuss in detail the pros and cons of implementing mandatory arbitration agreements in the workplace. Ultimately, it is a decision each employer should make (in consultation with a trusted employment lawyer). This Eleventh Circuit decision in the Walthour case certainly is something important to consider as part of your company’s decision-making on using or not using mandatory arbitration agreements.