AMY TOTENBERG, District Judge.
This case brought pursuant to the Fair Labor Standards Act, 29 U.S.C. § 216(b) ("FLSA") is before the Court on Defendants' Joint Motion to Compel Arbitration and Motion to Dismiss Plaintiffs' Complaint or, Alternatively, Motion to Stay Proceedings (hereinafter referred to as "Motion to Compel Arbitration") [Doc. 6]. The issue before the Court, whether a contractual waiver of the right to bring a collective action in a mandatory arbitration agreement is enforceable under the FLSA, is a topic of increasing debate among federal district and appellate courts. The Court finds Plaintiffs' arguments against compelling individual arbitration to be persuasive. However, as the Eleventh Circuit has upheld the enforceability of similar arbitration provisions in FLSA cases, albeit on different grounds than those presented in the instant case, the Court concludes that it must
Plaintiffs Ashley Walthour and Kevin Chappell brought this putative FLSA collective action against Defendants alleging that they, and other similarly situated current and former employees, were improperly misclassified as exempt from the FLSA's overtime requirements and were required to work in excess of 70 hours per week without overtime pay.
(Doc. 6-2 at 4-5.) Defendants seek to compel arbitration of Plaintiffs' FLSA claims pursuant to the Arbitration Agreements.
In support of their Motion to Compel Arbitration, Defendants assert that requiring mandatory arbitration of Plaintiffs' FLSA claims is supported by Supreme Court and Eleventh Circuit precedent and does not run afoul of the congressional intent in enacting the FLSA. In response, Plaintiffs argue a contractual waiver of their statutory right to a collective action under 29 U.S.C. § 216(b) of the FLSA is unenforceable as a matter of law. Specifically, Plaintiffs assert the following in support of the argument that the FLSA's collective action provision creates a non-waivable substantive right:
(2) § 216(b) is integral to the FLSA, making the collective action provision non-waivable;
(3) courts have held that all other provisions of § 216(b) — those providing the remedies of minimum wage and overtime backpay, liquidated damages, and attorney's fees — are substantive rights that cannot be contractually waived;
(4) the right to proceed collectively under the FLSA is not simply procedural because the Act contains its own collective action provision instead of relying on Fed. R.Civ.P. 23's class action procedure;
(5) the Department of Labor, the agency charged with enforcement of the FLSA, has taken the position that the collective action provision is a substantive non-waivable right; and
(6) the legislative history of the Act demonstrates that the right to proceed in a collective action to enforce the provisions of the FLSA is integral to the remedial purposes of the Act.
Defendant's Arbitration Agreement here requires its employees, as a condition of employment, to submit their claims to mandatory arbitration and requires the employees to give up their right to proceed as a class of one of more employees in any proceeding. The Court considers the enforceability of the Arbitration Agreement under the provisions of the Federal Arbitration Act, the Fair Labor Standards Act, and the relevant case law addressing mandatory arbitration agreements in the employment context below.
The validity of an arbitration agreement is generally governed by the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1 et seq., which was enacted in 1925 to reverse the longstanding judicial hostility to arbitration agreements and to place arbitration agreements upon the same footing as other contracts. Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991); Caley v. Gulfstream Aerospace Corp., 428 F.3d 1359, 1367 (11th Cir.2005). "The FAA embodies a liberal federal policy favoring arbitration agreements." Caley, 428 F.3d at 1367 (internal quotations omitted) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)). The Supreme Court has long recognized the arbitrability of federal statutory claims, noting that "[b]y agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum." Gilmer, 500 U.S. at 26, 111 S.Ct. 1647.
Under the FAA, arbitration agreements are "valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of the contract." 9 U.S.C. § 2. An agreement to arbitrate federal statutory claims is generally enforceable unless "Congress has evinced an intention to preclude a waiver of judicial remedies for the statutory rights at issue." Gilmer, 500 U.S. at 26, 111 S.Ct. 1647. Where such a Congressional intention exists, it may be shown by reference to the text of the statute, its legislative history, or "an `inherent conflict' between arbitration and the [statute's] underlying purposes." Id. The burden is on the party opposing arbitration to show that Congress intended to preclude waiver of a judicial forum in favor of an arbitral forum for the statutory claims. Id. "The Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved
The FLSA was enacted as part of President Franklin D. Roosevelt's New Deal legislation in 1938. According to the Supreme Court in Brooklyn Sav. Bank v. O'Neil, "the prime purpose of the [FLSA] was to aid the unprotected, unorganized and lowest paid of the nation's working population; that is, those employees who lacked sufficient bargaining power to secure for themselves a minimum subsistence wage." 324 U.S. 697, 707 n. 18, 65 S.Ct. 895, 89 L.Ed. 1296 (1945) (citing 81 Cong. Rec. 7652, 7672, 7885; 82 Cong. Rec. 1386, 1395, 1491, 1505, 1507; 83 Cong. Rec. 7283, 7298, 9260, 9265; H. Rep. No. 1452, 75th Cong., 1st Sess., p. 9; S. Rep. No. 884, 75th Cong., 1st Sess., pp. 3, 4), reh'g denied, 325 U.S. 893, 65 S.Ct. 1189, 89 L.Ed. 2005 (1945). "The statute was a recognition of the fact that due to the unequal bargaining power as between employer and employee, certain segments of the population required federal compulsory legislation to prevent private contracts on their part which endangered national health and efficiency and as a result the free movement of goods in interstate commerce." Id. at 706-707, 65 S.Ct. 895.
In order to effectuate the comprehensive remedial purposes of the FLSA, § 216(b) provides that any employer who violates the minimum wage and overtime provisions of the Act is liable to their employees for unpaid minimum wages or overtime compensation, additional liquidated damages, attorney's fees and expenses. Employers are also subject to "equitable relief as may be appropriate to effectuate the purposes of [§] 215(a)(3) of this title, including without limitation employment, reinstatement, promotion, and the payment of wages lost and an additional equal amount as liquidated damages." 29 U.S.C. § 216(b).
The FLSA further contains a "right of action" provision whereby employees may enforce the damages provision as follows:
Id. (emphasis added). This collective action provision is referred to in the statute as a right in itself, not merely a procedural mechanism by which to enforce other rights established by Congress in the FLSA. Id. (stating that "[t]he right provided by this subsection to bring an action by or on behalf of any employee, and the right of any employee to become a party plaintiff to any such action" terminates only if the Secretary of Labor brings its own complaint for violations of the FLSA under § 217 seeking payment of unpaid minimum wages or overtime compensation or under § 216(a) seeking legal or equitable relief for willful violations of § 215 sought as a result of alleged violations of § 215(a)(3) of the Act).
In Hoffmann-La Roche Inc. v. Sperling, the Supreme Court examined the legislative history behind the FLSA's collective action provision:
493 U.S. 165, 173, 110 S.Ct. 482, 107 L.Ed.2d 480 (1989) (as incorporated into the Age Discrimination in Employment Act "ADEA"). The Court in Hoffmann thus concluded that because "Congress left intact the "similarly situated" language providing for collective actions" in its amendments "[t]he broad remedial goal of the statute should be enforced to the full extent of its terms." Id. The July 8, 1937 Senate Report from the Committee on Education and Labor regarding the FLSA states:
75th Cong., 1st Sess., S. Rep. No. 884, p. 3. Pursuant to § 216(b) of the Act, Congress has stated its policy that FLSA plaintiffs should have the right to proceed collectively. See Hoffmann-La Roche Inc. v. Sperling, 493 U.S. at 173, 110 S.Ct. 482.
Moreover, both the Supreme Court and the Eleventh Circuit have held that permitting contractual waiver of the other rights and remedies provided alongside the collective action provision in § 216(b) — the right to minimum wage, overtime compensation, liquidated damages, and attorney's fees — would nullify the purposes of the Act. Brooklyn Sav. Bank v. O'Neil, 324 U.S. at 707, 65 S.Ct. 895 (addressing whether an employee's written waiver of rights under § 216 barred a subsequent action to recover statutory damages and reasoning that "a statutory right conferred on a private party, but affecting the public interest, may not be waived or released if such waiver or release contravenes the statutory policy"); Silva v. Miller, 307 Fed.Appx. 349 (11th Cir.2009) (holding that the "FLSA provides for reasonable attorney's fees [and] the parties cannot contract in derogation of FLSA's provisions" even in a settlement agreement). "Recognizing that there are often great inequalities in bargaining power between employers and employees, Congress made the FLSA's provisions mandatory; thus, the provisions are not subject to negotiation or bargaining between employers and employees." Lynn's Food Stores, Inc. v. U.S. ex rel. U.S. Dept. of Labor, 679 F.2d 1350, 1352 (11th Cir.1982) (citing Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697, 65 S.Ct. 895.) "FLSA rights cannot be abridged by contract or otherwise waived because this would `nullify the purposes' of the statute and thwart the legislative policies it was designed to effectuate." Id. (quoting Barrentine v. Arkansas-Best Freight System, 450 U.S. 728, 740, 101 S.Ct. 1437, 67 L.Ed.2d 641 (1981) (internal citations omitted)).
Notwithstanding the Supreme Court's long history of favoring employees' substantive
In Caley, the Eleventh Circuit found that an arbitration agreement that precluded class actions in a case brought under the FLSA, the ADEA, and the Employee Retirement Income Security Act (ERISA) was not unconscionable under Georgia contract law and was therefore enforceable. 428 F.3d at 1378. Following the Supreme Court's rationale in Gilmer that "the fact that certain litigation devices may not be available in an arbitration is part and parcel of arbitration's ability to offer `simplicity, informality, and expedition,'" Caley held that the prohibition of class actions in an arbitration agreement was consistent with the FAA's goals. Id. (quoting Gilmer, 500 U.S. at 31, 111 S.Ct. 1647). Although Caley, which was decided solely on state law grounds, did not determine whether the right to proceed in a collective action was a non-waivable substantive right under the FLSA, it has been uniformly cited by the district courts in this Circuit as binding authority for the proposition that FLSA class waivers in arbitration agreements are enforceable. See infra at 1275-76.
Defendants and the other courts addressing this issue rely on the Supreme Court's decision in Gilmer rejecting an argument similar to Plaintiffs' here in a case concerning the ADEA, which expressly adopts the FLSA collective action provision. Gilmer, 500 U.S. 20, 111 S.Ct. 1647. Gilmer held that the compulsory arbitration of ADEA claims pursuant to arbitration agreements was not inconsistent with the statutory framework and purposes of the ADEA. Id. at 27-33, 111 S.Ct. 1647. The Gilmer Court found no inherent conflict between the ADEA's goal of furthering important social policies and enforcing arbitration of the plaintiff's age discrimination claims. Id. at 27-28, 111 S.Ct. 1647 (noting previous holdings that claims under the Sherman Act, the Securities Exchange Act of 1934, RICO, and the Securities Act of 1933, all of which are designed to advance important public policies, are appropriate for arbitration). "[S]o long as the prospective litigant effectively may vindicate [his or her] statutory cause of action in the arbitral forum, the statute will continue to serve both its remedial and deterrent function." Id. at 28, 111 S.Ct. 1647 (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985)).
In rejecting the plaintiffs' argument that compulsory arbitration was improper because it deprived claimants of the judicial forum provided for by the ADEA, the Supreme Court in Gilmer noted that "if Congress intended the substantive protection afforded [by the ADEA] to include protection against waiver of the right to a judicial forum, that intention will be deducible from text or legislative history." Id. at 29, 111 S.Ct. 1647 (quoting Mitsubishi, 473 U.S. at 628, 105 S.Ct. 3346). The plaintiff in Gilmer argued that compelling arbitration would violate the purposes of the ADEA because it would not allow for class actions. The Gilmer Court rejected
Id. at 32, 111 S.Ct. 1647 (quoting Nicholson v. CPC Int'l Inc., 877 F.2d 221, 241 (3rd Cir.1989)).
Contrary to how it has sometimes been interpreted, Gilmer did not expressly decide whether the right to proceed collectively is a substantive right under the ADEA. Gilmer simply held that because "statutory claims may be the subject of an arbitration agreement," arbitration agreements may be enforceable "`unless Congress itself has evinced an intention to preclude a waiver of judicial remedies for the statutory rights at issue.'" Id. at 26, 111 S.Ct. 1647 (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. at 628, 105 S.Ct. 3346). The Court in Gilmer concluded that there was no indication from the text or history of the ADEA that Congress intended to afford substantive protection against the waiver of the right to a judicial forum in light of the ADEA's flexible approach to resolution of claims and the Equal Employment Opportunity Commission's informal methodology of out-of-court dispute resolution. Id. at 29, 111 S.Ct. 1647. Thus, while Gilmer established that FLSA claims are arbitrable under the FAA in light of the strong federal policy favoring arbitration, the question whether the right to proceed collectively under the FLSA in either arbitration or a judicial forum may be waived remains undecided by the Supreme Court.
Nonetheless, every circuit court save one addressing the issue has held that plaintiffs' inability to proceed on a class or collective basis in arbitration does not prevent them from vindicating their substantive rights under the FLSA. See Owen v. Bristol Care, Inc., 702 F.3d 1050 (8th Cir. 2013) ("There is no inconsistency between either the FLSA text or its legislative history and the conclusion that arbitration agreements containing class waivers are enforceable in cases involving the FLSA."); Carter v. Countrywide Credit Industries, Inc., 362 F.3d 294, 298 (5th Cir.2004) (citing Gilmer and rejecting plaintiffs' claim that their inability to proceed collectively deprives them of substantive rights available under the FLSA); Adkins v. Labor Ready, Inc., 303 F.3d 496 (4th Cir.2002) (holding that where there is "no suggestion in the text, legislative history, or purpose of the FLSA that Congress intended to confer a nonwaivable right to a class action" a plaintiff's "inability to bring a class action cannot by itself suffice to defeat the strong congressional preference for an arbitral forum"); Horenstein v. Mortgage Market, Inc., 9 Fed.Appx. 618, 619 (9th Cir.2001) ("Although plaintiffs who sign arbitration agreements lack the procedural right to proceed as a class, they nonetheless retain all substantive rights under the [FLSA]."). But see Skirchak v. Dynamics Research Corp., 508 F.3d 49 (1st Cir.2007) (affirming district court's finding that class action waiver in arbitration agreement was unconscionable and contrary to the purpose of the FLSA).
Nonetheless, Plaintiffs' arguments here are convincing, and the Court finds that persuasive authority exists to support Plaintiffs' argument that the right to participate in a FLSA collective action is substantive rather than merely procedural.
The question of whether the statutory right to a collective action created by the FLSA may be waived in an arbitration agreement depends upon Congress's intent as evidenced by the Act. See Brooklyn Sav. Bank v. O'Neil, 324 U.S. at 704-05, 65 S.Ct. 895 ("With respect to private rights created by a federal statute, such as Section 216(b), the question of whether the statutory right may be waived depends upon the intention of Congress as manifested in the particular statute."); Gilmer, 500 U.S. at 26, 111 S.Ct. 1647. Where such a congressional intention exists, it may be shown by reference to the text of the statute, its legislative history, or by a broader consideration of the legislative policy behind the provision as evidenced by its legislative history and the provisions in and structure of the Act. Id. at 706, 65 S.Ct. 895; Gilmer, 500 U.S. at 26, 111 S.Ct. 1647 (noting Congressional intent may also be shown by demonstrating "an `inherent conflict' between arbitration and the [statute's] underlying purposes"). The language of § 216(b) indicates that Congress did not intend that the collective action provision be waivable. The collective action provision is referred to in § 216(b) as a "right of action" not merely as a procedure by which to enforce FLSA rights.
In addition, the structure of the FLSA supports a conclusion that Congress intended that the right to proceed collectively was substantive rather than procedural. The right of action, including a collective action, is contained in the same provision of the Act that sets forth the substantive remedies guaranteed by the FLSA which have all been held to be non-waivable rights. See Brooklyn Sav. Bank v. O'Neil, 324 U.S. at 707, 65 S.Ct. 895; Barrentine, 450 U.S. at 740, 101 S.Ct. 1437 (1981); Lynn's Food Stores, 679 F.2d at 1352. Thus, by placing it the section of the statute alongside the compensatory remedies, Congress further evidenced its intent that the right to proceed collectively was an integral substantive right afforded by the FLSA. As the Eleventh Circuit has previously held "Congress made the FLSA's provisions mandatory; thus, the provisions are not subject to negotiation or bargaining between employers and employee." Lynn's Food Stores, 679 F.2d at 1352.
Consideration of the legislative policy behind the FLSA and its collective action provision further suggests that the right to proceed collectively cannot be waived. "The legislative debates indicate that the prime purpose of the legislation was to aid the unprotected, unorganized and lowest paid of the nation's working population ... who lacked sufficient bargaining power to secure for themselves a minimum subsistence wage." Brooklyn Sav. Bank v. O'Neil, 324 U.S. at 716 n. 18, 65 S.Ct. 895 (citing 81 Cong. Rec. 7652, 7672, 7885; 82 Cong. Rec. 1386, 1395, 1491, 1505, 1507; 83 Cong. Rec. 7283, 7298, 9260, 9265. See also H. Rep. No. 1452, 75th Cong., 1st Sess., p. 9; S. Rep. No. 884, 75th Cong., 1st Sess., pp. 3, 4). In addition, a central purpose of the FLSA's collective action provision is to allow "plaintiffs the advantage of lower individual costs to vindicate rights by the pooling of resources." Hoffmann-La Roche Inc., 493 U.S. at 170, 110 S.Ct. 482. As the purpose of the collective action provision is to decrease costs for the "unprotected, unorganized and lowest paid" employees, it would violate the very purpose of the Act to allow waiver of the right of these employees to pool their resources together to pursue their statutory remedies. See Brooklyn Sav. Bank v. O'Neil, 324 U.S. at 704-707, 65 S.Ct. 895. "Therefore, an otherwise enforceable arbitration agreement should not become the vehicle to invalidate the particular Congressional purposes of the collective action provision and the policies on which that provision is based." Raniere v. Citigroup Inc., 827 F.Supp.2d at 313-14.
In sum, the Court finds persuasive authority to support Plaintiffs' assertion here that the right to proceed collectively, either in a judicial forum or in arbitration, is a substantive right afforded by the FLSA.
Accordingly, Defendants' Motion to Compel Arbitration and Motion to Dismiss [Doc. 6] is
August 21, 2012 Order denying Defendant's Motion for Certification of Issue for Interlocutory Appeal in Jewell v. Aaron's, Inc., Civil Action No. 1:12-cv-0563, at 14-15. Moreover, numerous courts, including district courts in this Circuit, have refused to apply Fed.R.Civ.P. 23 to collective actions under the FLSA distinguishing the more stringent commonality requirement in Rule 23 from the "similarly situated" requirement in FLSA collective actions. See, e.g., Rindfleisch v. Gentiva Health Services, Inc., Civil Action No. 1:10-cv-3288-SCJ, 2011 WL 7662026, *4 (Dec. 29, 2011).