On Aug. 15, 2018, the Sixth Circuit in Gaffers v. Kelly Services, Inc. held that the Fair Labor Standards Act (FLSA) does not render an arbitration agreement that requires claims to be brought individually illegal and unenforceable. Following the Supreme Court’s recent decision in Epic Systems Corp. v. Lewis, which held that a federal statute does not displace the Arbitration Act unless it includes a “clear and manifest” congressional intent to make individual arbitration agreements unenforceable, the court rejected the plaintiff’s arguments that FLSA displaced the Federal Arbitration Act simply by providing for a right to “collective action.” Instead, the Sixth Circuit, consistent with Epic, held that the FLSA “gives employees the option to bring their claims together. It does not require employees to vindicate their rights in a collective action, and it does not say that agreements requiring on-on-one arbitration become a nullity if an employee decides that he wants to sue collectively after signing one.” The Sixth Circuit then went on to reject the plaintiff’s next argument that the Arbitration Act’s savings clause permitted the court to refuse to enforce the individual arbitration agreements because they are “illegal” under the FLSA based on Epic.
- The Gaffers decision is not surprising in that Epic addressed the same issue, but from the perspective of the National Labor Relations Act. The Gaffers plaintiff was attempting merely to open a hole through which they could walk that seemed to have been closed by Epic. No luck there.
- Ohio employers should give serious consideration to requiring their employees to sign agreements requiring individual arbitration of claims. While such agreements may not be best for employers in all circumstances, employers with large hourly work forces particularly may benefit from the ability to avoid collectively filed FLSA actions because plaintiff lawyers will have little financial incentive to take individual cases alleging wage and hour violations through arbitration.
- Employers that have mandatory arbitration agreements that do not include a class or collective action waiver definitely should consider adding the waiver to require the cases be brought individually. There is little imaginable that could be worse than defending a class or collective arbitration case.