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The Beginning of the End for Wage & Hour Class Actions Through Arbitration Agreements? Second Circuit Sets Stage

Posted in Class Actions, Discrimination & Harassment, Highlight, Litigation, Wage & Hour

Suppose you have your employees’ sign agreements to arbitrate all of  their employment disputes.  (I’ve talked about arbitration agreements in many posts before.)

Can you have an arbitration agreement that says that an employee is precluded from bringing a Title VII (race or gender discrimination) class action claim in Court?

Employees have argued that because most arbitration agreements preclude an employee from bringing a class-wide claim in arbitration, they should be allowed to go to court because of a right to bring class actions — despite what the agreements might say.

The Second Circuit, which is the federal circuit covering Connecticut, last week disagreed saying that there is no “substantive statutory right” to pursue these types of “pattern or practice” class actions. 

The case, Parisi v. Goldman Sachs & Co., can be downloaded here.

As the Court stated,”we see no reason to deviate from the liberal federal policy in favor of arbitration.”

Still left to be decided by the Second Circuit  is whether it will reach the same conclusion for wage & hour collective actions (under the Fair Labor Standards Act).  A decision on that issue is expected this year.

Why is this important?

Because even after many years, wage & hour class action litigation continues unabated. 

If employers can reduce the threat of wage & hour class actions through an arbitration agreement, then that would represent the first real barrier to those claims. 

For now, the stage is set.  How the story will go for wage & hour class actions, however, is still to be determined.

  • http://twitter.com/J_BAlexander J Bhandary-Alexander

    But there is a substantive right under 216(b) of the FLSA to bring a case on behalf of yourselve and other employees similarly situated (a/k/a a collective action):  “An action to recover the liability prescribed in either of the preceding sentences may be maintained against any employer (including a public agency) in any Federal or State court of competent jurisdiction by any one or more employees for and in behalf of himself or themselves and other employees similarly situated.”  Title VII and the FLSA are fundamentally different in that very relevant respect, right?

    • schwarda

      Agreed. But six circuit courts have already approved of arbitration agreements that restrict FLSA class actions. The Second Circuit has yet to decide the issue. And given the importance the court has placed on arbitration, it’s not unreasonable to think that they will consider it strongly.