Applying the “effective vindication” exception to the Federal Arbitration Act, the U.S. Court of Appeals for the Tenth Circuit affirmed the district court’s decision in denying a motion by the operator of several massage therapy schools to enforce an arbitration provision that was part of the enrollment agreement students signed when enrolling at the school. In Nesbitt v. FCNH (10th circ. 2016), the plaintiff, a student at the massage therapy school, filed a complaint in court arguing that the school violated the Fair Labor Standards Act (FLSA) and various state wage and hour laws by requiring students to provide massage therapy services to clients without pay. The defendant moved to stay the proceedings and to compel arbitration per the enrollment agreement. The court found that the arbitration agreement, which incorporated the American Arbitration Association’s commercial arbitration rules and which would require the plaintiff to share in paying the arbitrator’s fees and to pay her own legal costs even if she prevailed in the arbitration, effectively deprived her of her FLSA rights.
