Sixth Circuit Court Falls into Line with Right of Employers to Enforce Class Action Arbitration Clauses - American Society of Employers - Michael Burns

Sixth Circuit Court Falls into Line with Right of Employers to Enforce Class Action Arbitration Clauses

On August 15th the Sixth Circuit Court of Appeals handed down a ruling upholding an employer’s agreement to arbitrate claims individually.  This decision was in line with the recent Supreme Court decision that determined the National Labor Relations Act’s (NLRA) stated right of collective concerted activity did not supersede the Federal Arbitration Act (FAA). In its Epic Systems Corp. v. Lewis decision (138 S. Ct. 1612 [2018]) the U.S. Supreme Court (SCOTUS) held that the NLRA does not invalidate individual arbitration agreements. This ruling brought several federal Appeals Courts back into line regarding the scope of the NLRA, including Michigan’s own Sixth Circuit Court of Appeals.gavel

In Gaffers v Kelly Services, Inc. (No. 16-2210) the Court heard a case brought by Jonathan Gaffers alleging Kelly Services underpaid him and a class of similar employees under the Fair Labor Standards Act (FLSA).  Bringing suit to correct this underpayment, Gaffers was “seeking back pay and liquidated damages under the collective-action provisions of the” FLSA. Kelly Services challenged the class action showing that some of the employees were covered by signed individual arbitration agreements. Plaintiff Gaffer had not signed the agreement, however. Kelly Services moved to compel individual arbitration for those employees that had signed the agreement.

The Sixth Circuit was asked two questions:

1.      Do the NLRA and FLSA displace the Federal Arbitration Act by providing a right to “concerted activities” or “collective action?

2.      Even if the NLRA or FLSA did not wholly displace the FAA should the statutes make the arbitration agreements illegal and unenforceable under the FAA’s savings clause?

The Sixth Circuit, along with the 7th and 9th Circuit Courts of Appeal, had previously ruled the NLRA superseded the FAA and fell into line with the U.S. Supreme Court’s decision upholding individual arbitration under the NLRA.  It took the Epic Systems ruling further by holding that the FAA applied to FLSA claims as well because “Congress did not expressly state that an arbitration agreement poses no obstacle to pursuing a collective action.”

The Court upheld the right of those employees that did not sign the arbitration agreement to pursue collective action against Kelly Services on their FLSA claims.

The Sixth Circuit Court (perhaps humbly) stated, “whether modern arbitration practice is consistent with Congress’s goals for the FLSA is a question only Congress can answer. Our role is to interpret and analyze the statute’s text – not what Gaffers thinks Congress meant to say.” This falls into line with the Supreme Court’s Epic Systems Corp. ruling.  It brings the NLRB decision and subsequent court decisions back into line under the FAA.

Gaffer alleged because the FLSA gives him the express right to pursue collective action, the individual agreements requiring individual arbitration are illegal and unenforceable. The Sixth Circuit deferred again to the SCOTUS’ Epic ruling citing that the savings clause includes equal treatment rules. This rule holds that a Plaintiff “can attack an arbitration agreement like they would any other agreement; but they cannot attack the agreement simply because it is one involving arbitration.”

With this decision, the Sixth Circuit Court reconciles itself to the alternative to its decision made in 2017 (NLRB v. Alternative Entm’t, Inc.).  In that decision the Sixth Circuit ignored decisions out of the Fifth and Eighth Circuits.  Those decision held that class and collective action waivers are enforceable and deferred to the NLRB’s now erroneous decision that the NLRA’s concerted activities right somehow worked in harmony with the FAA under its savings clause to allow class action lawsuits despite individual agreements to the contrary.

 

Sources: Michigan Bar eJournal ( 8/25/2018); Gaffers v Kelly Services, Inc. (No. 16-2210) (8/15/2018); Sixth Circuit Adds to Circuit Split About the Enforceability of Class and Collective Action Waivers in Employment Arbitration Agreements Class Action Trends newsletter (6/6/2017)

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