In a recent Sixth Circuit decision, the appellate court concluded that the Fair Labor Standards Act (“FLSA”) does not prohibit the use of arbitration agreements which ban class actions and other collective actions. See Gaffers v. Kelly Services Inc., 6th Cir. No. 2:16-cv-10128 at 1 (2018); see also 29 U.S.C. § 201 et seq. In Gaffers, we see the logical consequences of Epic Systems ruling on the National Labor Relations Act (“NLRA”) play out in other statutes regulating labor such as the FLSA.
Background
Jonathan Gaffers (“Gaffers”) worked as an employee for Kelly Services Inc., which operates call centers. Id at 1. Gaffers worked from home as a “virtual call center support.” Id at 2. Ultimately, Gaffers brought suit under the FLSA claiming that Kelly Services Inc. neglected to compensate Gaffers for logging in and out on a daily basis as well as fixing technical issues that routinely arose. Id. Gaffers brought suit on behalf of himself and over 1,600 employees for liquidated damages and back pay. Id.
Procedural History
While Gaffers himself did not sign an arbitration agreement, almost half of the proposed class had signed an agreement that stated individual arbitration was the only forum for employment-related issues. Id. Therefore, Kelly Services sought to compel arbitration under the Federal Arbitration Act (“FAA”). Gaffers rebutted their position, arguing that under the NLRA and the FLSA the arbitration agreements were unenforceable. Id. The trial court agreed and denied Kelly Services motion to compel arbitration, resulting in the appeal to the Sixth Circuit. Id.
The Sixth Circuit’s Analysis
The Sixth Circuit reviewed the case de novo, and quickly sought to analyze Gaffers’ arguments as to why the trial court was correct. Id. First, Gaffers asserted that the NLRA and the FLSA “displaced” the FAA since both acts allow for collective actions and concerted activities. Id; see also 29 U.S.C. § 157; 29 U.S.C. § 216. Second, Gaffers hedged that even if the NLRA and FLSA did not fully displace the FAA, that the statutes nonetheless still make the arbitration agreements at issue unenforceable since the language in the agreements prohibits collective actions. Id at 3.
At the outset, the Sixth Circuit summarily dismissed Gaffers’ arguments relating to the NLRA by pointing to the Supreme Court’s decision in Epic Systems v. Lewis. Id. Since the Supreme Court found that the NLRA did not override the FAA, Gaffers’ argument to the contrary was quickly discarded. Id.
However, the court did analyze Gaffers’ FLSA points in more detail, albeit only slightly more. The court again relied on Epic Systems and its discussion of the NRLA’s interaction with the FAA to conclude that a similar statute with almost the exact same language regarding collective actions was found by the Supreme Court to be preempted by the FAA. Id at 4. Gaffers contended that the Court’s allowing the FAA to trump the FLSA will constitute bad policy since the drafters of the FLSA did not wish for modern arbitration to allow for the prohibition of class actions and other collective actions. Id. The Sixth Circuit replied that its job was to interpret the statute’s clear language, not guess what the drafters of the legislation were assuming when drafting the language itself. Id. Thus, Gaffers’ first point was squarely rejected.
Gaffers’ next argued that the savings clause of the FLSA allows courts to refuse to enforce arbitration agreements that can be revoked for any reasons a court could refuse to enforce a general contract. Id. Gaffers’ specifically argued that the arbitration agreements were illegal in that the FLSA clearly allowed collective and class actions and that the arbitration agreement’s prohibition of said actions were illegal. Id.
Again, the Sixth Circuit pointed to Epic Systems and found that parties arguing against the enforcement of an arbitration agreement must do so on similar grounds that a party might present against a general contract. Id at 5. In other words, since Gaffers was arguing against the agreement on the basis that it was an arbitration agreement, and thus illegal in relation to the FLSA provision, he was precluded from asserting that defense via the holding in Epic. Id.
Ultimately, the Sixth Circuit reversed the trial court’s decision and remanded. Id at 1.
Conclusion
The Sixth Circuit’s opinion reads as though Gaffers is attempting to navigate his way out of a maze, but at every turn he is met with a dead end, with the words “Epic Systems” boldly written on the wall. Gaffers v. Kelly Systems Inc. certainly shows a consequence of Epic Systems, but more importantly reveals that collective and class actions regarding labor claims are in serious jeopardy.
You can read the full opinion here: http://www.opn.ca6.uscourts.gov/opinions.pdf/18a0170p-06.pdf.
(Nick Leyh, a third-year student at the University of Missouri School of Law prepared this post.)