In the last week, we have seen several significant decisions from the U.S. Supreme Court. On Monday, however, the Court made a noteworthy "non-decision" by declining a petition for certiorari that raised the question of whether a collective action under the Fair Labor Standards Act is a non-waivable, substantive right.
In Walthour v. Chipio Windshield Repair LLC, No. 13-1354 (June 30, 2014), former auto body employees filed a putative collective action against Chipio Windshield Repair LLC and an affiliate under the Fair Labor Standards Act (FLSA), alleging that the defendants had failed to pay them minimum and overtime wages. Upon being hired, the employees had signed arbitration agreements with class action waivers and stipulations that all employment disputes would be resolved though individual arbitration. The district court granted the defendant's motion to compel arbitration.
In affirming, the Eleventh Circuit relied upon the U.S. Supreme Court's decisions in Gilmer v. Interstate/Johnson Lane Corp. and American Express Co. v. Italian Colors. In Gilmer, the Court held that the Age Discrimination in Employment Act (ADEA), which expressly adopts the collective action language set forth in FLSA, doesn't bar individual arbitration. In Italian Colors, an anti-trust case, the U.S. Supreme Court reiterated the rejection of the argument that a class action waiver was invalid under the "effective vindication" exception to enforcement because the class action waiver did not eliminate an individual plaintiff's right to pursue its own statutory remedies. In so holding, the Court cited its decision in Gilmer and explained that it "had no qualms in enforcing a class waiver in an arbitration agreement even though the federal statute at issue, the [ADEA] expressly permitted collective actions." We blogged about the Italian Colors case last year. The Eleventh Circuit concluded that "based on these Supreme Court decisions read together, we conclude that the text of FLSA § 16(b) does not set forth a non-waivable substantive right to a collective action." The Eleventh Circuit also found that "the legislative history of [FLSA § 16(b)] does not contain the requisite contrary congressional command sufficient to override the [Federal Arbitration Act]."
In their petition for certiorari, the employees argued that the question of whether the FLSA contains a "contrary congressional command" remains unresolved because none of the cases the Eleventh Circuit relied on were brought under the FLSA.
The Bottom Line: The U.S. Supreme Court's denial of the employees' petition leaves unchanged the position espoused by the 2nd, 4th, 5th, 8th, and 11th Circuits – that the FLSA does not provide for a non-waivable, substantive right to bring a collective action. Accordingly, employers can take a deep breath (for now) and continue including class and collective action waivers in their arbitration agreements.
This blog post is a joint submission with BakerHostetler's Employment Law Spotlight blog.
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