January 2013

By: James B. Sherman, Esq.

On January 7, 2013, the United States Court of Appeals for the Eighth Circuit overturned a trial court decision that refused to enforce an arbitration agreement that contained a waiver of the employee’s right to pursue class action wage and hour claims. In Owen v. Bristol Care, Inc., the Court of Appeals cited to “more than two decades of pro-arbitration Supreme Court precedent” in reversing the trial court’s decision not to compel arbitration. One such precedent was the Supreme Court’s April 27, 2011 decision in AT&T Mobility, LLC. v. Concepcion, (see this author’s E-Alert entitled: “Supreme Court Rules Plaintiff Lawyers Have No Class…As In “No Class Action!”). The lower court ignored AT&T because it involved a consumer contract, not an employment context. However, the Owen court determined there was no reason arbitration should not rule in an employment agreement.

This decision represents yet another major blow to the plaintiff lawyer’s bar and its thirst for big pay day, class action lawsuits. The fact that this was a wage and hour suit brought under the Fair Labor Standards Act (FLSA) – easily the fastest growing area for class action litigation in the employment arena – is particularly disheartening to plaintiff lawyers. Two pro-plaintiff lawyer associations filed so-called “friend of the court” amicus briefs in support of the now overturned district court decision.

This decision is a first of its kind in the Eighth Circuit, which includes Minnesota, Iowa, Missouri, the Dakotas and Nebraska. No similar decision has come from the Seventh Circuit (Illinois, Wisconsin and Indiana); however, other Circuits have reached the same conclusion to enforce agreements to arbitrate claims and waive class action lawsuits, even in wage and hour disputes under FLSA.

Knowing that arbitration agreements can thwart class action employment lawsuits may tempt employers to rush to create arbitration agreements for all their employees. However, there are many other considerations – advantages and disadvantages – to arbitration agreements. To consult with a knowledgeable attorney on whether or not arbitration agreements are right for your particular workplace, feel free to contact James B. Sherman at (952) 746-1700 or  jasherman@wesselssherman.com, or any of the experienced attorneys of Wessels Sherman.