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Class Action Waiver in Arbitration Agreement Upheld by Eighth Circuit Court

Tuesday, February, 5, 2013

In AT&T Mobility LLC v. Concepcion (2011), the U.S. Supreme Court enforced a class action waiver in a consumer arbitration agreement that was considered by many to be a beneficial ruling for many employers.  However, immediately following this ruling, the National Labor Relations Board muddied the waters by claiming that such waivers infringe on employees’ rights under Section 7 of the National Labor Relations Act (NLRA). 

Now, the Eighth Circuit U.S. Court of Appeals has determined that the National Labor Relations Board was faulty in their reasoning and thus, a class action waiver or collective action waiver in an employment arbitration agreement was indeed enforceable.  This ruling was based on Owen vs. Bristol Care, a case that involved an administrator and the residential care facility for elderly residents for which she worked.

When hired by Bristol Care, Owen signed an arbitration agreement that included a class or collective action waiver, which would waive her right to participate in class action arbitration.  However, in September 2011, Owen, along with several other employees (both current and former) filed a suit claiming that Bristol Care misclassified administrators and did not pay overtime that was due to them under the Fair Labor Standards Act (FLSA). 

Bristol Care filed a motion to compel arbitration but the motion was denied when the district court found the arbitration agreement unenforceable due to the class action waiver that was included.  According to the court, the former case of AT&T vs. Concepcion was not applicable when the claim was under the umbrella of the Fair Labor Standards Act (FLSA).  They also determined that since the Fair Labor Standards Act (FLSA) provides employees with the right for class action suits, any case involving the provisions of the FLSA cannot uphold a class action waiver, as this would be fundamentally counter to the rights provided by the FLSA.

However, the recent ruling by the Eighth Circuit Court negated the district court’s ruling, stating that the FLSA does not give employees the right to bring class action against an employer.  They stated that in the same sense employees are given the opportunity to “opt in” to a class action suit, they should also be provided the opportunity to “opt out” of such suits through signing a class action waiver. 

This ruling is good news for employers under the jurisdiction of the Eighth Circuit Court, since class action suits involving wage and hour discrepancies can pose a large risk to the company.  However, other courts will likely be presented with this same issue in future cases.