Earlier this month, the NLRB ruled that employers may not require employees to consent to the waiver of class rights as part of an employment arbitration agreement. The NLRB’s rationale was that the Fair Labor Standards Act and the Norris-LaGuardia Act guarantee employees the right to enforce their provisions through collective action.
Now, in Sutherland v. Ernst & Young, Judge Kimba Wood of the US District Court for the Southern District of New York has reaffirmed her earlier invalidation of a class waiver in an employment agreement that would have precluded class litigation to enforce provisions of the FLSA, but on slightly different grounds. Judge Wood relied on the familiar arbitration doctrine that an arbitration agreement is not enforceable if it would prevent a party from “effectively vindicating her statutory rights.” Focusing on the prohibitive cost of discovery for a plaintiff pursuing a small FLSA claim individually, she distinguished AT&T Mobility v. Concepcion as follows:
The terms of the arbitration agreement at issue in Concepcion ensured that the Concepcions could bring their claim in arbitration on an individual basis, either representing themselves or with counsel. The fact that a plaintiff in the same situation as the Concepcions might choose not to make a claim for such a small overcharge is not the Court’s concern, even if a class-action lawyer might be eager to bring the case on behalf of all similarly situated plaintiffs, but for the class-action waiver. By contrast, the terms of the arbitration agreement and the cost of discovery in Sutherland’s case preclude her from redressing alleged FLSA violations.
Finding that the arbitration agreement at issue would “operate as a waiver of Sutherland’s right to pursue her statutory remedies pursuant to FLSA,” while also pointing out that her rationale depended on an interpretation of the FAA rather than state law subject to preemption, Judge Wood refused to enforce the class waiver. Because Stolt-Nielsen prevented her from ordering class arbitration, her ruling sends the parties to class litigation instead.