Supreme Court Denies Hearing a FLSA Collective Action Waiver Case

Supreme Court Denies Hearing a FLSA Collective Action Waiver Case

Last year, for the very first time in the history of federal appellate courts, the Sixth Circuit addressed an employee’s waiver of rights to participate in a Fair Labor Standard Act (FLSA) collective action outside the context of arbitration. The court’s invalidation of this collective action waiver in a severance agreement came as a blow to employers. In doing so, the court held that collective-action waivers signed by some plaintiffs were not valid, as an employment agreement could not be utilized to deprive employees of statutory FLSA rights outside of the arbitration context. [Killion v. KeHE Distribs., LLC, 761 F.3d 574 (6^th Cir. July 30, 2014); Killion v. KEHE Distribs., LLC, No. 13-4340, 2014 U.S. App. LEXIS 18024 (6^th Cir. Sep. 11, 2014)].

Now, the Supreme Court has declined to grant review of this Sixth Circuit decision that casts a significant doubt on the effectiveness of an employee’s waiver of FLSA collective action rights. The Supreme Court provided no comment for the denial of certiorari, probably because the Sixth Circuit’s decision tends to create no circuit split for the Court to resolve for lack of any employer’s attempt to compel arbitration. KeHE Distribs., LLC v. Killion, 135 S. Ct. 1745 (2015).

The case revolves around the facts wherein plaintiffs, the sales representatives allege that they were improperly classified as outside salespeople by their employer, that exempted them from overtime pay under the FLSA. These sales representatives had signed a standard FLSA collective action waiver as part of a general release and waiver contained in their separation agreements. In ruling that employers would gain an unjust advantage over competitors and would discourage employees from bringing individual claims under the FLSA owing to any potential individual recovery being outweighed by the costs of litigation, the Sixth Circuit contradicted with the Supreme Court.

The Supreme Court had opined that courts could not invalidate a contractual waiver of class arbitration on the ground that a plaintiff’s cost of individually arbitrating a federal statutory claim exceeded potential recovery, and the antitrust laws did not evince an intention to preclude a waiver of class-action procedure. See Am. Express Co. v. Italian Colors Rest., 133 S. Ct. 2304 (2013). The Sixth Circuit also distinguished the opinions of its sister Circuits, and reasoned that absent any arbitration agreement, there was no countervailing federal policy that outweighed the policy articulated in the FLSA. Killion v. KeHE Distribs., LLC, 761 F.3d 574, 592 (2014).

FLSA rights, therefore, can only give way in the presence of an arbitration agreement, and that without arbitration there can be no waiver of the collective action rights.