EASTERN DISTRICT COURT OF NEW YORK ENFORCES ARBITRATION AGREEMENT’S FLSA COLLECTIVE ACTION WAIVER

02.28.2013

In the wake of the Eighth Circuit’s recent decision in Owens v. Bristol Care, Inc., the Eastern District Court of New York has joined the growing list of federal courts that have found FLSA collective action waivers contained in arbitration agreements enforceable.  In Torres v. United Healthcare Serv., 12 CV 923 (DRH) (ARL), 2013 U.S. Dist. LEXIS 14200 (E.D.N.Y. Feb. 1, 2013), the plaintiffs brought a collective action against the company claiming unpaid overtime. United Healthcare maintained an “Employment Arbitration Policy,” which required any dispute covered by the Policy to “be arbitrated on an individual basis” and provided that an individual employee could not “seek to bring his/her dispute on behalf of other employees as a class or collective action.”  Because each plaintiff had received a copy of the Policy upon hire and had electronically acknowledged that he or she read and agreed to the Policy’s terms, United Healthcare sought to compel arbitration. The district court enforced United Healthcare's Employment Arbitration Policy, holding that nothing in the language of the FLSA or its legislative history prevented an employee from waiving the right to pursue a collective action. The court found unavailing plaintiffs’ blanket assertion that the waiver would effectively prevent potential plaintiffs with small claims from bringing an FLSA claim due to the cost of individual arbitration. However, citing decisions of the Supreme Court and Second Circuit, the court recognized that such an agreement could be invalidated if the plaintiffs were able to offer sufficient evidence to establish that the cost of arbitration “would be prohibitively expensive.” Additionally, consistent with the Eighth Circuit’s position in Owens, the court declined to adopt the NLRB’s 2012 D.R. Horton decision, 2012 NLRB LEXIS 11, in which the NLRB found that collective action waivers violate employees’ right to engage in concerted activity guaranteed by Section 7 of the NLRA.  The court quoted Owens when it determined that the waiver at issue did not violate Section 7 because it did not prevent an employee from filing a complaint with the Department of Labor or other administrative agency, nor did it prevent such an agency “from investigating [or] . . . filing suit on behalf of a class of employees.” While the United Healthcare decision is favorable for New York employers, the issue of the enforceability of FLSA class and collective action waivers is not yet settled. While the trend in federal courts is to find such waivers enforceable, the NLRB continues to use its holding in D.R. Horton to strike them down, and the Second Circuit and the United States Supreme Court have yet to address such a specific policy.  Accordingly, we advise all employers to confer with counsel over the risks and benefits of maintaining an FLSA class and collective action waiver policy and to ensure compliance with the specific holdings of these recent decisions. For more information, please contact John R. Vreeland, Esq., Director of the firm’s Wage & Hour Compliance Practice Groupjvreeland@genovaburns.com, or Joseph V. Manney, Esq., jmanney@genovaburns.com.

Tags: ArbitrationNLRBWage and Hour, Fair Labor Standards ActCollective actionClass actionEastern District of New YorkCollective action waiverClass action waiver