The British have a phrase “too clever by half” to describe complex schemes that ultimately won’t work.
We all know from cases such as Concepcion, Stolt-Nielsen, Italian Colors, and their progeny that arbitration agreements are far more likely to be enforced today than only a year or two ago, particularly in the class action context. So, what if you haven’t revised your arbitration agreements or don’t even have one and a class action suit is filed? Can you have your current employees sign them and then compel arbitration on an individual basis? Maybe so, but not the way the employer attempted in a recent Eleventh Circuit case.
In Billingsley v. Citi Trends, Inc., Case No. 13-15261 (11th Cir. Mar. 25, 2014) (unpublished), the employer, a retail clothing chain, faced a putative collective action under the FLSA brought by a store manager who claimed that she was misclassified as exempt from overtime. After the filing of suit, and after the initial scheduling conference with the district court, the employer rolled out an ADR program requiring arbitration of claims on an individual basis. It then began a series of individual meetings with its current managers. These managers were called into meetings with a human resources representative at the back of their store ostensibly to discuss a new employee handbook. When the manager arrived, there was both the human resources representative and a witness. The store managers were each presented with the arbitration policy, a fill-in-the-blank declaration describing his or her duties, and a disclosure form. The managers were asked to sign the forms, but were not told what happened if they refused to sign.
After the plaintiff moved for conditional certification, the employer opposed certification for those who had signed the agreements on the grounds that they had to arbitrate their claims on an individual basis. The district court refused to enforce them on the grounds that under these circumstances they had been procured by misleading and coercive means.
Interestingly, the Eleventh Circuit did not find that it would refuse to enforce post-suit arbitration agreements nor, for that matter, did the district court. Both courts were troubled by the manner in which the employer procured the agreements, and limited the remedy simply to preventing the enforcement of these particular agreements, procured in the fashion the employer had used, in the case that was pending. Both courts appear to have adopted a measured approach.
Only a week before, in a completely unrelated case that has been designated for publication, the Eleventh Circuit did enforce a pre-suit arbitration agreement with respect to FLSA claims. See Walthour v. Chipio Windshield Repair, LLC, Case No. 13-11309 (11th Cir. Mar. 21, 2014). Between that case and the moderate remedy in Billingsley, it seems clear that the Eleventh Circuit will uphold arbitration agreements barring extraordinary circumstances.
The Bottom Line: Employers seeking to adopt arbitration agreements after a class or collective action has been filed must, at a minimum, do so with tact.