An Arbitration Clause Wins Again

In an earlier post, we analyzed the Supreme Court’s holding in Epic Systems Corp. v. Lewis, which held that employers may include in employment agreements arbitration provisions that require employees to arbitrate their disputes individually rather than through a collective or class action. In Epic Systems, the Supreme Court considered, and rejected, several arguments posited by the employees concerning the National Labor Relations Act (“NLRA”) and whether it protected certain arbitration provisions from enforcement under the Federal Arbitration Act (“Arbitration Act”). Bottom line of that Supreme Court opinion: nothing in the NLRA prohibits employers from enforcing arbitration provisions that require individual litigation of employment disputes.

Squarely applying the Epic Systems holding, the Sixth Circuit Court of Appeals (covering Tennessee, Kentucky, Michigan, and Ohio) recently rejected arguments that the Fair Labor Standards Act (“FLSA”)—the federal version of what is commonly referred to as a “wage-and-hour claim”—limits employers’ rights to enforce the same type of arbitration provisions. In the case, Gaffers v. Kelly Services, Inc., the court adopted identical rationale to the Epic Systems ruling, concluding the following:

1. The FLSA grants an option of suing collectively, not a requirement. Thus, courts can give effect to both the Arbitration Act and FLSA without conflict—“employees who do not sign individual arbitration agreements are free to sue collectively, and those who do sign individual arbitration agreements are not.” Gaffers, slip op’n at 3.
2. The fact that an agreement requires arbitration is not alone a valid basis for challenge after Epic Systems. Gaffers, slip op’n at 4-5.

So while nothing in the Gaffers holding should be a surprise after the Epic Systems decision, it further solidifies an employer’s right to use arbitration provisions to limit class or collective litigation of employee disputes. Given the cost of defending those types of suits, these provisions are an effective cost-saving measure.

*Photo Credit: Photo by rawpixel on Unsplash.

The information contained on this blog is not legal advice, nor does this blog create an attorney-client relationship. Klein Bussell attorneys do not blog about pending matters handled on behalf of our clients and will never disclose client confidences.