Second Circuit Enforces Class Action Waiver In FLSA Case Under AMEX

The Sutherland v. Ernst & Young case raised a now familiar question and the Second Circuit gave an answer in keeping up with recent U.S. Supreme Court precedent. The question was whether an employee could invalidate a class action waiver in an arbitration agreement if the "waiver removes the financial incentive . . . to pursue a claim under the Fair Labor Standards Act . . . ("FLSA")." The Second Circuit responded "in the negative", clarifying a number of related issues along the way.

Introduction

Stephanie Sutherland, a former Ernst & Young ("E&Y") employee, filed a putative class action against the company under the FLSA and New York law. She claimed that lower-level audit employees did not receive additional compensation for working more than 40 hours per week.

E&Y filed a motion to dismiss or stay the proceedings, and to compel arbitration in accordance with the Federal Arbitration Act ("FAA"). Ultimately, District Judge Kimba Wood, denied E&Y's motion because the class action waiver provision was not enforceable under the Second Circuit's 2009 decision in In re American Express Merchant's Litigation ("AMEX I"). The AMEX litigation was discussed extensively here in a March 5, 2013 blog article. Judge Wood found that "[e]nforcement of the class waiver provision . . . would effectively ban all proceedings by Sutherland against E&Y [because of her] low-value, high cost claim."

On March 31, 2011 E&Y moved for reconsideration based on AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011). Judge Wood denied that motion on January 17, 2012, finding that, unlike the plaintiffs in Concepcion, Sutherland was "not able to vindicate her rights absent a collective action" 847 F. Supp. 2d 528, 535 (S.D.N.Y. 2012).

The Second Circuit Appeal

Apparently recognizing the significance of the issues in the appeal, the Equal Employment Opportunity Commission and the Department of Labor filed an amicus brief supporting Sutherland in the Second Circuit. My March 18, 2013 blog article describes the arguments raised in briefing before the Court.

No "Contrary Congressional Command" in the FLSA

In its August 9, 2013 opinion, the Second Circuit considered, as a threshold matter, if the FLSA contained a "contrary congressional command" foreclosing waiver of class proceedings. The court noted that every Court of Appeals to address the issue has decided that the FLSA does not prevent the waiver of collective action claims. And the Second Circuit agreed for two...