Looking to shield yourself from Fair Labor Standards Act class action cases?

by on March 30, 2009 · 0 Comment POSTED IN: HR Info Center

Binding arbitration and FLSA law

Looking for ways to guard against a wage-and-hour class action lawsuit?

If so, you’re not alone. White-collar workers are increasingly filing class action cases under the Fair Labor Standards Act (FLSA) for unpaid overtime. These suits, which may involve scores of similar claims, can cost six figures (or more) to defend – so even if you eventually win, you lose.

Lessons From A Failure

Thus, it seems logical that the best way to defend against a Fair Labor Standards Act lawsuit is to stop it before it starts.

That’s what a Massachusetts company did recently, by seeking to impose binding arbitration on all employee claims involving FLSA law. As it happens, this firm failed, but there may be useful lessons for you in its failure. Just before Thanksgiving, the employer sent an e-mail telling workers a new dispute resolution program would take effect the Monday after the holiday. Employees who stayed with the company after that date were deemed to have agreed to arbitration of any work-related legal claims, waiving their right to take these claims to court.

Hidden Impact

Later, a number of white-collar employees sued under FLSA law for unpaid wages, and claimed they hadn’t waived their right to do so. The court agreed.

The company’s problem? It relegated the detailed statement about the waiver of overtime claims to an obscure appendix to the e-mailed program documents. The court said that even if the company hadn’t intended to hide the relevant language, it had in fact done so.

The court said expressly that it was not ruling on whether all waivers of rights under FLSA law were legit or not. So there may still be some room for a carefully crafted binding arbitration plan.

Cite: Skirchak v. Dynamics Research, Nos. 06-2136/06-2180, 1st Cir., 11/19/07. Issue 6.12 1-21-08

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