The Fourth Circuit Refuses To Enforce Arbitration Clause And Class Action Waiver In Employment Contracts

As we have previously written, several Supreme Court decisions have upheld, in various contexts, arbitration agreements that waive the right to assert claims on a class basis. See, e.g., AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011); American Express Corp. v. Italian Colors Restaurant, 570 U.S. 333 (2013); DIRECTV, Inc. v. Imburgia, 577 U.S. __, 136 S.Ct. 463 (2015). But the Fourth Circuit recently showed this trend does not mean an arbitration agreement will serve as a blanket protection against class claims. Degidio v. Crazy Horse Saloon and Restaurant, Inc., No. 17-1145, 2018 U.S. LEXIS App 1178 (4th Cir. Jan. 18, 2018).

The plaintiff was a dancer who performed at a club owned by the defendant, Crazy Horse. On August 8, 2013, plaintiff brought a putative class action, and a putative collective action under the Fair Labor Standards Act (FLSA), alleging that Crazy Horse violated the FLSA's overtime and minimum wage provisions, as well as other laws, by mischaracterizing her and the club's other performers as independent contractors rather than employees.

The plaintiff's employment agreement did not contain an arbitration clause or class action waiver, and the case proceeded through discovery until November 2014. At about the same time that discovery closed, Crazy Horse began requiring its performers to enter into an employment agreement that included an arbitration clause and class waiver.

Plaintiff later moved for class certification under Rule 23 and for conditional certification as a collective action under the FLSA. In its opposition, Crazy Horse informed the court about the new employment agreements that contained the arbitration clause, but did not move to compel arbitration or indicate that it intended to do so if the performers who signed the agreements became plaintiffs. Instead, Crazy Horse submitted declarations from performers stating that they preferred to be independent contractors, which Crazy Horse argued precluded class certification because plaintiff was not similarly situated to the putative class members.

On September 30, 2015, the trial court granted plaintiff's motion for FLSA certification. The court found that entertainers who performed at Crazy Horse's clubs were employees, not independent contractors. Between November 2015 and January 2016, fourteen opt-in plaintiffs joined the litigation, nine of whom had signed the arbitration agreements. Rather than move to compel arbitration, however, Crazy Horse filed...