February 21, 2019
JPMorgan Chase Bank N.A. convinced the Fifth Circuit Feb. 21 that the court overseeing a wage dispute by its employees improperly sent notice of collective action certification to workers bound by arbitration agreements.
Employees who sign valid arbitration agreements shouldn’t receive notice that Fair Labor Standards Act claims against their employer have been certified because they are ineligible to opt in, the U.S. Court of Appeals for the Fifth Circuit held.
Notice was sent to 42,000 current and former workers in Chase’s call centers. But 85 percent of them signed arbitration agreements, Chase argued.
The ruling has the potential to disrupt an emerging plaintiffs’ attorney tactic designed to address the prevalence of arbitration agreements that waive workers’ right to class or collective actions. Plaintiffs’ attorneys have begun filing individual arbitrations by the thousands after courts enforce arbitration contracts. That can impose steep costs on employers that foot the bill for arbitrations, thus increasing the workers’ settlement leverage.
As long as none of the named plaintiffs in FLSA lawsuits signed arbitration agreements, courts have waited to address the arbitration issue until after they decided whether putative collective members should get notice, attorney Kent Williams said. He’s one of the lawyers involved in mass arbitrations filed against Chipotle Mexican Grill Inc. for alleged wage violations.
However, defendants can invoke arbitration contracts prior to litigation over noticing the proposed FLSA collective if a named plaintiff signed an arbitration pact, Williams told Bloomberg Law. A finding that the arbitration agreement is valid prevents notices from going out to potential members who also signed them, he said.
Plaintiffs’ lawyers would likely have a more difficult time locating potential clients for mass arbitrations absent the contact information obtained via the noticing process.
But it’s unclear whether the Fifth Circuit decision’s prohibition on noticing putative collective members who signed arbitration agreements is binding precedent. The decision itself rejected Chase’s petition for extraordinary review—known as mandamus—to challenge the decision to notice potential members with arbitration agreements.
Although the three-judge Fifth Circuit panel said that its opinion is binding, its discussion of noticing and arbitration could potentially be viewed by other judges in the circuit as commentary that they aren’t obligated to follow.
In its ruling, the Fifth Circuit panel agreed that the district court erred in ordering notice to the employees who signed arbitration agreements but denied mandamus because the error didn’t rise to the “clearly and indisputably” erroneous standard required for mandamus.
Shannon Rivenbark sued Chase alleging that it had violated the FLSA by failing to compensate her and other employees at Chase’s call centers for tasks they completed “off-the-clock.”
The district court conditionally certified a collective action and ordered that 42,000 employees receive notice of the litigation. It held it couldn’t determine that there is no possibility that all members will be able to join the suit until Chase moves to compel arbitration against specific individuals.
The appeals court agreed with Chase that notice shouldn’t have been sent to the 35,000 employees who signed arbitration agreements.
“The district court should revisit its decision in light of this opinion, which is now binding precedent throughout the Fifth Circuit,” the court said. It gave the district court 30 days.
Attorneys for the workers and a Chase representative didn’t immediately respond to requests for comment.
The case is In re JPMorgan Chase & Co., 5th Cir., No. 18-20825, 2/21/19.