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Arbitration Agreements in the Wage-and-Hour Context
The remarkable rise in wage-and-hour litigation under the Fair Labor Standards Act (“FLSA”) ' and increasingly under state law ' over the past few years has been described as a “tsunami.” Nearly every day, news breaks of another multi-million-dollar, class-action settlement for unpaid overtime or alleged off-the-clock work. Wage-and-hour claims are a significant concern, due in part to the low standard to proceed to class discovery and the possibility of attorneys' fees accompanying any plaintiff's verdict. Discussions between employers and their counsel about wage-and-hour claims are common. For corporate attorneys, questions about how an employer can limit both the costs associated with and exposure to wage-and-hour claims have become ever more difficult. Employer-employee arbitration agreements may be part of the answer.
Defending an FLSA Collective Action
An employee who believes he or she has a claim for unpaid overtime, off-the-clock work, or one of many other protections offered by the FLSA may bring a case on behalf of all “similarly situated” employees. Rather than apply Rule 23 of the Federal Rules of Civil Procedure, the FLSA mandates a two-stage certification process under section 216(b) of the Fair Labor Standards Act. During the first stage, the named plaintiffs seek conditional certification, which provides them with the opportunity to send notice to putative class members and pursue discovery. The standard for conditional certification is very low, and it is typically granted. Plaintiffs must show only that putative class members had similar job requirements and pay provisions and that they were victims of the same company policy or practice. Importantly, once this requirement is met, the case proceeds to full class discovery.
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