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U.S. Court of Appeals For The Second Circuit Reaffirms Employment Arbitration Agreements

Thursday, August, 22, 2013


In recent legal news, two decisions from the U.S. Court of Appeals in the Second Circuit have confirmed the enforceability of employer arbitration agreements with regard to class action waivers.  The two cases were Sutherland v. Ernst & Young and Ranieuere v. Citigroup, Inc.  The court held that the Federal Arbitration Act requires courts to enforce valid agreements for arbitration even when other relevant law (like the Fair Labor Standards Act) allows enforcement through other means like class action.               

 

The court rejected the argument that rights of collective action are integral and fundamentally substantive elements of the Fair Labor Standards Act that cannot be waived.  Instead, the court found that the FLSA didn’t contain congressional commands to the contrary that would make class arbitration waivers unenforceable.  This holding is similar to what has already been found by the Fourth, Fifth and Eighth Circuits, who all agreed that an employee’s right to file FLSA collective action was subject to a contractual waiver.  In addition, the Supreme Court found in Gilmer v. Interstate/Johnson Lane Corp that the collective action waiver should be upheld in that suit, which was brought under the Age Discrimination in Employment Act. 

 

The Court of Appeals also rejected the argument that collection action waivers are unenforceable when putative class members of the collection or class are unable to vindicate his or her statute rights due to the cost of the litigation process.  The outcome of Sutherland and Raniere cannot strictly be founded in courts in other jurisdictions.  They are showing that federal courts (as well as the U.S. Supreme Court) are putting a great deal of emphasis on enforcing the Federal Arbitration Act.  The recent American Express case is also important because the growing opinion of the court is that their decisions hold beyond the antitrust concept (which applied in American Express), thus extending to all arbitration agreements.