Coerced Arbitration Agreement Not Enforceable In FLSA Collective Action

Executive Summary: The Eleventh Circuit has affirmed a district court's decision denying an employer's motion to compel the arbitration of a Fair Labor Standards Act (FLSA) collective action, finding that the court's decision was within its authority to manage such actions. The arbitration agreements supporting the motion to compel arbitration were signed after the FLSA collective action was filed. In denying the motion to compel, the district court held that the arbitration agreements were unconscionable and that there was a record of abuse in obtaining the agreements. See Billingsley v Citi Trends, Inc., 560 Fed Appx. 914 (11th Cir. 2014).

Background

In 2012, two store managers brought a collective action against their employer under the FLSA, claiming they were improperly classified as exempt and improperly denied overtime pay. After the suit was filed, the parties participated in a conference on a proposed schedule and the process for the conditional pursuit of a collective action, including notification of similarly situated managers and opt-in rights. A further conference with the court was scheduled, and the district court provided for a briefing schedule.

Subsequently, one of the managers filed a motion for conditional certification of the collective action. In response, the employer filed copies of signed arbitration agreements that were obtained in April 2012, after the initial FLSA complaint filings with the court. The employer argued that managers who signed the arbitration agreements were excluded from the collective action. The managers challenged the employer's actions in obtaining the arbitration agreements, which provided for individual but not collective actions, and asked the court for a corrective order.

Lower Court Decision

The district court characterized the employer's behavior in obtaining the arbitration agreements as "back-room meetings that were 'highly coercive' and 'Interrogation-like'." The court made certain findings of fact, including that the employer implemented its ADR policy in the late spring and early summer of 2012, after service of the complaint in the original action and after the court scheduling conference in May 2012. The ADR policies contained mandatory agreements to arbitrate all disputes individually rather than collectively and were provided to the managers by the company's human resources representatives in a series of individual meetings styled as the issuance of a new employee handbook. The...