Eighth Circuit Holds Employers Can Enforce Arbitration Agreements with Class Action Waivers

Employers sometimes ask employees to sign a Mandatory Arbitration Agreement ("MAA").  These MAAs normally indicate that  the employer and employee agree “to the resolution by binding arbitration of all claims or controversies for which a federal or state court or other dispute-resolving body otherwise would be authorized to grant relief whether arising out of, relating to or associated with . . . any . . . legal theory that Employee may have against the Company or that the Company may have against the Employee.”  The Eighth Circuit recently considered a case called Owen v. Bristol Care, Inc. in which an employee argued that the MAA was invalid because it contained a class action waiver provision that prohibited the employee from arbitrating claims subject to the agreement on behalf of a class.   The Eighth Circuit held that the MAA was valid and reversed the district court’s order denying the employer's motion to compel arbitration.

In Owen v. Bristol Care, Inc. the MAA signed by the employer and employee had the provision described above.  The MAA further applied to “claims for wages or other compensation,” as well as “claims for violation of any federal . . . statute . . . including but not limited to . . .the Fair Labor Standards Act . . . .” The agreement also contained a waiver that prohibited the parties “from arbitrating claims subject to [the] Agreement as, or on behalf of, a class” (the “class waiver”). The MAA, however, did "not waiv[e the] right to file a complaint with the U.S. Equal Employment Opportunity Commission . . . or any other federal, state or local agency designated to investigate complaints of harassment, discrimination, other statutory violations, or similar claims.”

In September 2011, Owen initiated this action against Bristol Care, alleging—on behalf of herself and other similarly situated current and former employees—that the company deliberately misclassified administrators like herself as “exempt” employees for the purposes of state and federal overtime laws, including the FLSA.

Owen alleged that Bristol Care required these employees to work more than forty hours per week without overtime compensation. Bristol Care moved to stay district court proceedings and compel arbitration in accordance with the MAA and the Federal Arbitration Act (“FAA”). See 9 U.S.C. §§ 3-4.

The district court relied on the recent National Labor Relations Board (“NLRB”) decision, In re D.R. Horton, Inc., 357 NLRB No. 184, 2012 WL 36274 (Jan. 3, 2012), and a district court decision from the Southern District of New York, Chen-Oster v. Goldman, Sachs & Co., 785 F. Supp. 2d 394 (S.D.N.Y. 2011), and concluded that class waivers are invalid in FLSA cases because the FLSA provides for the right to bring a class action.

Section 2 of the FAA provides that “[a] written provision in any . . . contract . . . to settle by arbitration a controversy thereafter arising out of such contract . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. The Supreme Court has stated repeatedly that this provision establishes a “liberal federal policy favoring arbitration
agreements.” CompuCreditCorp. v. Greenwood, 565 U.S. ---, 132 S. Ct. 665, 669 (2012) (quoting Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)); see also Concepcion, 131 S. Ct. at 1745; Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 25 (1991).

Section 2 requires courts to enforce arbitration agreements according to their terms. Dean Witter Reynolds, Inc., v. Byrd, 470 U.S. 213, 221 (1985). As a result, there must be a “contrary congressional command” for another statute to override the FAA’s mandate. CompuCredit, 132 S. Ct. at 669 (quoting Shearson/Am. Express, Inc. v. McMahon, 482 U.S. 220, 226 (1987)). “If such an intention exists, it will be discoverable in the text of the [statute], its legislative history, or an ‘inherent conflict’ between arbitration and the [statute’s] underlying purposes.” Gilmer, 500 U.S. at 26; see also CompuCredit, 132 S. Ct. at 672 (“When [Congress] has restricted the use of arbitration . . . it has done so with clarity.”). The burden is on the party challenging
the arbitration agreement to show that Congress intended to preclude a waiver of the judicial forum. Gilmer, 500 U.S. at 26.

The Eighth Circuit held that Owen identified nothing in either the text or legislative history of the FLSA that indicated a congressional intent to bar employees from agreeing to arbitrate FLSA claims individually, nor is there an “inherent conflict” between the FLSA and the Arbitration Act.

The Eighth Circuit also noted that the NLRB limited its holding to arbitration agreements barring all protected concerted action. Id. at *16. In contrast, the MAA does not preclude an employee from filing a complaint with an administrative agency such as the Department of Labor (which has jurisdiction over FLSA claims, see 29 U.S.C. § 204), the Equal Employment Opportunity Commission, the NLRB, or any similar administrative body. Cf. Gilmer, 500 U.S. at 28 (upholding an arbitration agreement that allowed Age Discrimination in Employment Act claimants to pursue

Further, nothing in the MAA precludes any of these agencies from investigating and, if necessary, filing suit on behalf of a class of employees. Second, even if D.R. Horton addressed the more limited type of class waiver present here, we still would owe no deference to its reasoning. Delock v. Securitas Sec. Servs. USA, No. 4:11-CV-520-DPM, 2012 WL 3150391, --- F. Supp. 2d ---- (E.D. Ark. Aug. 1, 2012), at *3 (“The
Board’s construction of the [NLRA] ‘is entitled to considerable deference and must be upheld if it is reasonable and consistent with the policies of the Act,’ . . . the Board has no special competence or experience in interpreting the Federal Arbitration Act.” (quoting St. John’s Mercy Health Sys. v. NLRB, 436 F.3d 843, 846 (8th Cir. 2006))).  The NLRB also attempted to distinguish its conclusion from pro-arbitration Supreme Court decisions such as Concepcion. D.R. Horton, 2012 WL 36274, at *16. This
court, however, is “not obligated to defer to [the Board’s] interpretation of Supreme Court precedent under Chevron or any other principle.” Delock, 2012 WL 3150391, at *3 (quoting N.Y. N.Y. LLC v. NLRB, 313 F.3d 585, 590 (D.C. Cir. 2002)).  Additionally, although no court of appeals has addressed D.R. Horton,2 nearly all of the district courts to consider the decision have declined to follow it.3

The Eighth Circuit noted that its conclusion is consistent with all of the other courts of appeals that have considered this issue and concluded that arbitration agreements containing class waivers are enforceable in FLSA cases. See, e.g., Vilches v. Traveler’s Cos., 413 F. App’x 487, 494 n.4 (3d Cir. 2011); Horenstein v. Mortg. Mkt., Inc., 9 F. App’x 618, 619 (9th Cir. 2011); Caley v. Gulfstream Aerospace Corp., 428 F.3d 1359, 1378 (11th Cir. 2005); Carter v. Countrywide Credit Indus. Inc., 362 F.3d 294, 298 (5th Cir.
2004); Adkins v. Labor Ready, Inc., 303 F.3d 496, 503 (4th Cir. 2002); see also Delock, 2012 WL 3150391, at *1 (explaining that it has generally “seemed settled law that an employee’s statutory right to pursue a wage claim as part of a collective action . . . could be waived in favor of individual arbitration”). These decisions also are consistent with more than two decades of pro-arbitration Supreme Court
precedent. See, e.g., CompuCredit, 132 S. Ct. 665; Concepcion, 131 S. Ct. 1740; Gilmer, 500 U.S. 20.

The Eighth Circuit held that given the absence of any “contrary congressional command” from the FLSA that a right to engage in class actions overrides the mandate of the FAA in favor of arbitration, we reject Owen’s invitation to follow the NLRB’s rationale in D.R. Horton and join our fellow circuits that have held that arbitration agreements containing class waivers are enforceable in claims brought under the FLSA.

If you signed an arbitration agreement with an employer, and you have questions about it, you should consider contacting Angela Madathil.  Madathil Law Office specializes in employment law in Nebraska, and offers free consultations.   

Madathil Law office serves Nebraska employment clients in Omaha, Lincoln, Lancaster County, Douglas County, Otoe, and Cass County Nebraska.  If need a Nebraska employment lawyer, consider contacting Angela Y. Madathil and the Madathil Law Firm.  

Contact us at angela@madathil-law.com or by telephone at 402.577.0686.  The firm offers free consultations.  For more information feel free to look at our website www.madathil-law.com.

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