Category

Employment Litigation

Sixth Circuit Applies Epic Decision In Requiring Arbitration Under FLSA

By | Class Action Lawsuits, Employment Litigation

The United States Court of Appeals for the Sixth Circuit (“Federal Appellate Court”) stated in its opinion filed on August 15, 2018: “The Supreme Court recently held that the National Labor Relations Act does not invalidate individual arbitration agreements. Epic Systems Corp. v. Lewis, 138 S. Ct. 1612, 1632 (2018). That holding answers half of this case. The other half, in which the plaintiffs seek to carve out a separate destiny for the Fair Labor Standards Act, meets a similar end. Since neither Act is an obstacle to the arbitration agreements in this case, we reverse and remand for further proceedings consistent with this opinion.”

The Underlying Facts

Jonathan Gaffers is a former employee of defendant Kelly Services, Inc. (“Kelly Services”). Kelly Services provides outsourcing and consulting services to firms around the world. One of these services is “virtual” call center support, where employees like Gaffers work from home.

Gaffers alleged that Kelly Services underpaid him and his fellow virtual employees. Specifically, Gaffers alleged that Kelly Services shortchanged them for time spent logging in to Kelly Services’ network, logging out, and fixing technical problems that arise. Gaffers brought suit on behalf of himself and his co-workers (over 1,600 joined the action) seeking back pay and liquidated damages under the collective-action provision of the Fair Labor Standards Act. 29 U.S.C. § 216(b).

About half of the employees that Gaffers sought to represent signed an arbitration agreement with Kelly Services (Gaffers himself did not sign one, but he is the representative of the collective action). Those agreements state that individual arbitration is the “only forum” for employment claims, including unpaid-wage claims. Kelly Services therefore moved to compel individual arbitration under the Federal Arbitration Act. 9 U.S.C. § 4. In response, Gaffers contended that the National Labor Relations Act and the Fair Labor Standards Act rendered the employees’ arbitration agreements unenforceable. The district court agreed and denied Kelly Services’ motion to compel arbitration. Kelly Services appealed, and the Federal Appellate Court proceeded with a de novo review.

Gaffers argued on appeal that the FLSA’s collective-action provision and the Arbitration Act are irreconcilable and that the former therefore displaces the latter. The Federal Appellate Court stated that in Epic, the U.S. Supreme Court held that a federal statute does not displace the Arbitration Act unless it includes a “clear and manifest” congressional intent to make individual arbitration agreements unenforecable. To clearly and manifestly make arbitration agreements unenforceable, Congress must do more than merely provide a right to engage in collective action. Instead, Congress must expressly state that an arbitration agreement poses no obstacle to pursuing a collective action. As in the NLRA, Congress made no such statement in the FLSA.

The FLSA provision at issue provides that an employee can sue on behalf of himself and other employees similarly situated. 29 U.S.C. § 216(b). In other words, it gives employees the option to bring their claims together. It does not require employees to vindicate their rights in a collective action, and it does not say that agreements requiring one-on-one arbitration become a nullity if an employee decides that he wants to sue collectively after signing one. Accordingly, the Federal Appellate Court stated it could give effect to both statutes: employees who do not sign individual arbitration agreements are free to sue collectively, and those who do sign individual arbitration agreements are not.

The Federal Appellate Court held: “because the FLSA does not “clearly and manifestly” make arbitration agreements unenforceable, we hold that it does not displace the Arbitration Act’s requirement that we enforce the employees’ agreements as written.  Accordingly, we reverse the district court’s decision to deny Kelly Services’ motion to compel on this basis.”

The Federal Appellate Court also rejected Gaffers’ argument that because the FLSA gives the employees a right to pursue a collective action, the agreements that the employees signed with Kelly Services requiring them to pursue individual arbitration are illegal and therefore unenforceable. The Federal Appellate Court held that the savings clause that allows courts to refuse to enforce arbitration agreements “upon such grounds as exist at law or in equity for the revocation of any contract” (9 U.S.C. § 2) includes an “equal-treatment” rule: individuals can attack an arbitration agreement like they would any other contract but they cannot attack the agreement simply because it is one involving arbitration. Accordingly, defenses that (1) apply only to arbitration agreements, or (2) interfere with the “fundamental attributes of arbitration” are both insufficient.

The Federal Appellate Court held that objecting to an agreement “precisely because [it] require[s] individualized arbitration proceedings instead of class or collective ones” does not bring a plaintiff within the territory of the savings clause. If otherwise, Gaffers (and others) could use this contract defense to attack arbitration itself and that selective treatment is exactly what Epic says is not allowed.

Source

Gaffers v. Kelly Services, Inc., No. 16-2210.

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U.S. Supreme Court Enforces Employment Arbitration Agreements

By | Business Litigation, Class Action Lawsuits, Employment Litigation

The Supreme Court of the United States (“Supreme Court”) enforced the arbitration agreements signed by three employees employed by three different employers, in its opinion filed on May 21, 2018.

In each of the three Supreme Court cases, an employer and employee entered into a contract providing for individualized arbitration proceedings to resolve employment disputes between the parties. Each employee nonetheless sought to litigate Fair Labor Standards Act and related state law claims through class or collective actions in federal court.

Although the Federal Arbitration Act generally requires courts to enforce arbitration agreements as written, the employees argued that its “saving clause” removes this obligation if an arbitration agreement violates some other federal law and that, by requiring individualized proceedings, the agreements violated the National Labor Relations Act. The employers countered that the Arbitration Act protects agreements requiring arbitration from judicial interference and that neither the saving clause nor the NLRA demands a different conclusion.

Until recently, courts as well as the National Labor Relations Board’s general counsel agreed that such arbitration agreements are enforceable. In 2012, however, the Board ruled that the NLRA effectively nullifies the Arbitration Act in cases like these, and since then other courts have either agreed with or deferred to the Board’s position.

The Supreme Court held that Congress has instructed in the Arbitration Act that arbitration agreements providing for individualized proceedings must be enforced, and neither the Arbitration Act’s saving clause nor the NLRA suggests otherwise.

The Supreme Court held: “The policy may be debatable but the law is clear: Congress has instructed that arbitration agreements like those before us must be enforced as written. While Congress is of course always free to amend this judgment, we see nothing suggesting it did so in the NLRA—much less that it manifested a clear intention to displace the Arbitration Act. Because we can easily read Congress’s statutes to work in harmony, that is where our duty lies.”

Source Epic Systems Corporation v. Lewis, 584 U. S. ____ (2018) .

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Employee Litigation Statistics

By | Employment Litigation

“The 2015 Hiscox Guide to Employee Lawsuits: Employee Charge Trends Across The United States” reported the for 2014, U.S. companies had at least an 11.7% chance of having an employment charge filed against them. However, some states have far higher instances of charge activity than the national average. Many of the higher-risk states in the Hilcox survey have state laws that go beyond U.S. federal guidelines, creating additional obligations and risks for employers.

A representative study of 446 closed claims reported by small- to medium-sized enterprises (SMEs) with fewer than 500 employees showed that 19% of employment charges resulted in defense and settlement costs averaging a total of $125,000. On average, those matters took 275 days to resolve. The average self-insured retention (deductible) for these charges was $35,000. Without employment practices liability insurance, these companies would have been out of pocket by an extra $90,000.

Most employment matters don’t end up in court, but for those that do, the damages can be substantial. The median judgment is approximately $200,000, which is in addition to the cost of defense. About 25% of cases result in a judgment of $500,000 or more.

Hiscox claims data showed that the average duration of an employment matter was 275 days; the percentage of matters that resulted in a defense and settlement payment was 19%; the average total cost of claims that resulted in a defense and settlement payment was $125,000; and, the percentage of charges that resulted in no payment by the insurance company was 81%.

Recent court rulings on major societal issues including immigration, same-sex marriage, discrimination against transgender employees and minimum wage increases are important for employers to pay attention to in relation to potential employee charges. Many of the states with the highest rates of employee charges have existing state statutes prohibiting discrimination against employees related to these classes and others may add these in 2016.

https://www.hiscox.com/documents/The-2015-Hiscox-Guide-to-Employee-Lawsuits-Employee-charge-trends-across-the-United-States.pdf

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EEOC Enforcement Litigation 10-Year Statistics

By | Employment Litigation

The following is from the “EEOC Litigation Statistics, FY 1997 through FY 2017” and reflects EEOC enforcement suits filed and resolved in the federal district courts over the past ten years:.

 

FY 1997 FY 1998 FY 1999 FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017
Suits
All Suits Filed 332 414 465 329 428 370 400 421 416 403 362 325 314 271 300 155 148 167 174 114 201
Merits Suits 300 374 438 292 388 342 366 378 381 371 336 290 281 250 261 122 131 133 142 86 184
Suits with Title VII Claims 182 254 341 236 289 268 298 297 295 294 268 224 188 192 162 66 78 76 83 46 107
Suits with ADA Claims 83 87 55 29 66 44 49 46 49 42 46 37 76 41 80 45 51 49 53 36 76
Suits with ADEA Claims 42 44 47 33 42 39 27 46 44 50 32 38 24 29 26 12 7 12 14 2 12
Suits with EPA Claims 4 10 9 9 14 12 12 5 13 10 7 0 2 2 2 2 5 2 7 5 11
Suits with GINA Claims 3 2 1 2 3
Suits filed under multiple statutes 11 19 13 14 19 19 19 14 17 22 16 9 9 14 9 3 11 7 14 5 24
Subpoena and Preliminary Relief Actions 32 40 27 37 40 28 34 43 35 32 26 35 33 21 39 33 17 34 32 28 17
Resolutions
All Resolutions 243 331 350 440 362 381 381 380 378 418 387 366 349 315 312 283 222 144 171 171 125
Merits Suits 214 295 320 407 321 351 351 346 338 383 364 339 321 287 276 254 209 136 155 139 109
Suits with Title VII Claims 132 189 211 315 232 266 275 277 259 295 297 265 251 199 215 162 135 87 87 84 57
Suits with ADA Claims 49 73 74 53 48 65 50 43 41 50 40 47 40 60 42 72 59 47 61 48 48
Suits with ADEA Claims 38 38 51 41 39 26 35 34 45 50 35 41 38 38 26 30 16 13 12 12 3
Suits with EPA Claims 7 4 7 6 15 9 13 9 12 8 14 3 5 0 2 2 4 5 1 7 4
Suits with GINA Claims 1 1 1 4 1
Suits filed under multiple statutes 12 9 22 8 12 15 21 14 18 17 18 16 13 10 8 12 6 13 6 16 4
Subpoena and Preliminary Relief Actions 29 36 30 33 41 30 30 34 40 35 23 27 28 28 36 29 13 8 16 32 16
Monetary Benefits ($ in millions) $114.7 $95.6 $98.7 $52.2 $49.8 $56.2 $146.6 $168.6 $104.8 $44.3 $54.8 $102.2 $82.1 $85.1 $91.0 $44.2 $38.6 $22.5 $65.3 $52.2 $42.4
Title VII $95 $62 $49.2 $35 $33.6 $29.2 $85.1 $158.5 $98 $34.3 $38.9 $65.6 $64.9 $74.0 $54.3 $34.3 $22.0 $15.3 $56.9 $36.8 $21.7
ADA $1.1 $2.8 $2.9 $2.9 $2.3 $15.1 $2.3 $2.5 $3.4 $2.8 $2.4 $3.6 $9.5 $2.9 $27.1 $5.4 $14.0 $3.7 $6.2 $12.1 $7.1
ADEA $18 $29.8 $42.8 $13.8 $3.1 $1.4 $57.8 $5.4 $2.4 $5.1 $3.1 $30.3 $6.7 $5.3 $8.4 $3.6 $2.1 $1.9 $0.8 $0.9 $12.1
EPA $0 $0 $0 $0.2 $0.2 $0.2 $0 $0 $0 $0 $0.2 $0.1 $0 $0.0 $0.0 $0.0 $0.2 $0.1 $0.0 $0.4 $0.2
GINA $0.0 $0.0 n.a* n/a* n/a* $0.0 $0.1
Suits filed under multiple statutes $0.5 $1 $3.8 $0.4 $10.7 $10.3 $1.5 $2.3 $1 $2.1 $10.2 $1.7 $0.9 $2.9 $1.1 $0.9 $0.2 $1.5 $1.3 $2.3 $1.

https://www.eeoc.gov/eeoc/statistics/enforcement/litigation.cfm

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