Articles Discussing General Issues In Employment Law Class Actions

In Chapman v. BOK Financial Corp., a federal court in Oklahoma found that the plaintiff loan officers failed, as a matter of law, to establish a willful violation of the Fair Labor Standards Act (FLSA) and dismissed those claims that were time-barred by the FLSA’s standard two-year limitations period. This is a welcome decision for employers, as some federal courts hesitate to resolve the issue of willfulness at the summary judgment stage despite the plaintiff’s failure to produce evidence of a willful violation.

The swelling tide of class action litigation against employers under the Fair Credit Reporting Act (FCRA) is unmistakable. It cuts across all industries, including retailers, restaurant chains, theatre chains, manufacturers, financial institutions and transportation companies. To illustrate how the threat to employers is concrete, not merely hypothetical, close to a dozen nationwide class actions were filed in plaintiff-friendly venues during just June and July 2014. Three suits were filed by one firm on the same day in July.

A judge of the U.S. District Court for the Central District of California recently issued a pro-employer ruling with regard to the jurisdictional minimum amount in controversy required by the Class Action Fairness Act (CAFA) of 2005—an issue that has not been resolved by the Ninth Circuit Court of Appeals and on which the district courts are split. According to this federal court, the amount in controversy in a case brought under the California Labor Code Private Attorneys General Act of 2004 (PAGA) includes the entire amount of potentially recoverable statutory damages regardless of how much of it is recoverable by the state or by individual employees. Stafford v. Brink’s Incorporated, U.S. District Court for the Central District of California, No. CV-14-1352-MWF-PLA (May 28, 2014).

The United States Court of Appeals for the Eleventh Circuit became the latest federal appellate court to enforce an arbitration agreement with a class action waiver in a collective action under the Fair Labor Standards Act. In Walthour v. Chipio Windshield Repair, LLC, the court affirmed the district court’s order granting the employers’ motion to compel plaintiffs to arbitrate their FLSA claims on an individual basis.

Executive Summary: The Eleventh Circuit recently held that an arbitration agreement that waives an employee’s ability to bring a collective action under the Fair Labor Standards Act (FLSA) is enforceable under the Federal Arbitration Act (FAA). See Walthour v. Chipio Windshield Repair, LLC (11th Cir. March 21, 2014). The court rejected the plaintiffs’ argument that the right to file a collective action under the FLSA is a non-waivable substantive right and that the agreement was invalid because it purported to waive that right. The court found no contrary congressional command in the FLSA that would override the FAA’s strong policy in favor of arbitration.

In Rea v. Michaels Stores, a recent per curiam decision by the Ninth Circuit Court of Appeals, the court held that the employer had timely and properly removed a class action to the U.S. District Court for the Central District of California under the Class Action Fairness Act (“CAFA”).

The Class Action Fairness Act (CAFA) was enacted in 2005 to make it easier for out-of-state defendants to remove interstate class actions to federal court. As the Senate Judiciary Committee’s Report noted at the time, plaintiffs’ attorneys were filing nationwide class actions and “carefully crafting language to avoid federal courts,” in order to “easily ‘game the system’ and avoid removal of large interstate class actions to federal court.” But even after CAFA’s enactment, out-of-state employers in the Ninth Circuit struggled to remove class actions because under the standard set forth in Lowdermilk v. U.S. National Bank Association, defendants needed to establish to a “legal certainty” the $5 million amount in controversy required for CAFA removal.

A recent Second Circuit decision has resulted in a major victory for employers who seek to eliminate class actions and resolve employment disputes through arbitration. In Southerland v. Ernst & Young LLP, Case No. 12-304 (August 9, 2013), the court held that nothing in the Fair Labor Standards Act of 1938 (FLSA), 29 U.S.C. § 201, et seq. prohibits an employer from including a class action waiver provision in an arbitration agreement. Under this holding, an employee cannot avoid a class-action waiver provision in an arbitration agreement by claiming that the waiver removes the financial incentive for her to pursue a claim under the FLSA. However, the Second Circuit did note that such a provision can be invalidated if it seeks to waive or prohibit the employee’s legal rights.