The issue of the enforceability of an employee’s agreement to arbitrate disputes with his or her employer on solely an individual basis and related waiver of the right to proceed in a representative capacity (i.e., class or collective action basis) continues to wend its way through to the higher courts. Ultimately, this issue likely will need to be resolved by the United States Supreme Court. However, in a recent ruling, the Court of Appeals for the Eighth Circuit (encompassing the states of Arkansas, Iowa, Minnesota, Missouri, Nebraska, and South and North Dakota) has come down squarely on the side of enforcing such agreements, ruling that direction on this issue is properly taken from recent Supreme Court jurisprudence issued under the Federal Arbitration Act (which governs such agreements to arbitrate). Owen v. Bristol Care, Inc., 2013 U.S. App. LEXIS 356 (8th Cir. Jan. 7, 2013).
The Owen decision rejects most, if not all, of the primary arguments asserted by employee-plaintiffs seeking to assert such a class/collective action waiver is unenforceable. For example, the Court held that there is no substantive “right” to pursue a collective action under the Fair Labor Standards Act and thus waiver is not prohibited. Further, the court, collecting authority, joined numerous district courts which have rejected the National Labor Relations Board’s decision in D.R. Horton holding that such agreements violate the National Labor Relations Act insofar as the right to proceed collectively under the FLSA constitutes “concerted protected activity” under the NLRA. The Court did note that the D.R. Horton decision itself remains on appeal in a sister court, the Fifth Circuit.
Employers who currently have agreements to arbitrate similar to that ruled upon in Owen should look at this decision in a very positive light; going forward it will be difficult for an employee to argue within the Eighth Circuit that such a waiver is not enforceable (absent an issue not addressed by Owen, such as procedural unconscionability). However, this issue remains far from settled nationwide, and legislative efforts have and may again be utilized to seek to counteract such rulings, and limit use of the individual arbitration mechanism in the employment context. Before implementing any type of mandatory arbitration program, employers should discuss the inclusion of a class/collective waiver as well as related issues with counsel.