The U.S. Supreme Court's ruling in Epic Systems Corp. v. Lewis was extended by the U.S. Court of Appeals for the Sixth Circuit yesterday in Gaffers v. Kelly Services, Inc. The court ruled that employers can lawfully require employees to resolve employment disputes through individual arbitration, and not through class or collective actions, notwithstanding the Fair Labor Standards Act (FLSA).
Although this case arose in the context of employment law, we anticipate that the ruling, like the prior Epic decision, will have implications for consumer financial services class actions, which frequently allege violations of one or more federal consumer protection statutes, such as the Equal Credit Opportunity Act, the Truth in Lending Act, the Electronic Fund Transfer Act, the Fair Credit Reporting Act, and the Fair Debt Collection Practices Act.
In a unanimous decision authored by Judge Amul Thapar, the Sixth Circuit found that a class action waiver in an arbitration agreement signed by employees was not rendered unenforceable by either the National Labor Relations Act (NLRA) or the FLSA. The decision was, in part, directly controlled by Epic, which held that class and collective actions are not "protected concerted activities" under the NLRA so that the NLRA does not bar enforcement of class action waivers under the Federal Arbitration Act (FAA).
The Gaffers court followed Epic's lead in holding that the FLSA is not an obstacle to enforcement of arbitration agreements. A plaintiff challenging enforcement of an individual arbitration agreement "faces a stout uphill climb," and must demonstrate "clear and manifest" congressional intent to make such an agreement unenforceable. The FLSA, like the NLRA and all other statutes considered by the Supreme Court, includes no such language demonstrating clear congressional intent overriding arbitration agreements or class waivers. Instead, the FLSA's authorization of collective action is permissive, not mandatory: lawsuits may be maintained "by any one or more employees . . . in behalf of himself or themselves and other employees similarly situated." 28 U.S.C. § 216(b). Without clear statutory language referencing arbitration, the Gaffers court rejected the plaintiff's arguments.
This ruling signals a continued expansion of Epic's rationale to class action claims brought by plaintiffs under other statutes. Despite this expansion of Epic, employers should still carefully draft or review and revise any employment arbitration agreements to ensure they will achieve the legal objectives intended.
Ballard Spahr's Labor and Employment Group routinely assists employers in drafting, reviewing, and defending the enforceability of employment and arbitration agreements, and have updated such agreements in light of the Epic decision.
The attorneys in Ballard Spahr's Consumer Financial Services Group pioneered the use of arbitration provisions in consumer financial services agreements. Litigators in the Group and the firm's Litigation Department regularly defend against class actions in state and federal courts around the country.
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