Second Circuit rulings might eliminate FLSA class actions

Posted on: September 6th, 2013 by Steve Larson
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Blog Wage and HourThe Second Circuit ruled Monday that Citigroup Inc.’s individual arbitration policy must be enforced in an overtime collective action, reinforcing its acceptance of class waivers in Fair Labor Standards Act cases.

In a summary order, a three-judge panel reversed a district court’s decision that the company’s policy requiring individual arbitration of employment disputes could not be enforced in a collective action accusing the banking giant of misclassifying its home-lending specialists as exempt from the FLSA’s overtime pay requirements. 

Siding with the banking giant in its appeal of the lower court’s order, the Second Circuit held that the plaintiffs’ main argument that the FLSA confers a substantive right to bring a collective action that cannot be waived was foreclosed by the court’s ruling last week in Sutherland v. Ernst & Young

In Sutherland, the same Second Circuit panel applied the U.S. Supreme Court’s recent decision backing the enforcement of a class action waiver in an antitrust case against American Express Co. to similar FLSA misclassification claims and found that the employer’s arbitration agreement should be applied.

The Sutherland decision held that the FLSA does not include a contrary congressional command that prevents a class action waiver provision in an arbitration agreement from being enforced by its terms — which is what the Supreme Court has held is necessary to bar the enforcement of an arbitration agreement.    

As such, in considering Citigroup’s appeal, the Second Circuit determined that for the same reasons laid out in the Supreme Court’s AmEx decision and those underlying the Sutherland decision, the lower court had erred in finding Citigroup’s arbitration policy unenforceable.

The dispute underlying Citigroup’s appeal dates to April 2011, when the plaintiffs sued the company, as well as its Citibank NA and CitiMortgage Inc. units, claiming they had been misclassified as overtime-exempt employees.

In May 2011, Citigroup asked the district court to compel arbitration of claims brought by two of the named plaintiffs, Tara Raniere and Nichol Bodden, who had signed pacts promising to arbitrate FLSA disputes on an individual basis, according to court filings.

But U.S. District Judge Robert Sweet denied the motion, ruling in November 2011 that FLSA collective action rights could not be waived through an arbitration agreement, prompting Citigroup to turn to the Second Circuit.

The attorney for the plaintiffs has indicated that it will seek an en banc review by the full Second Circuit.

The case is Raniere et al. v. Citigroup Inc. et al., case number 11-5213, in the U.S. Court of Appeals for the Second Circuit.