A Welcome ‘Waive’ of Second Circuit Cases: Class Action Waivers Deemed Enforceable

Coins and Hourglass

For the better part of the last decade, the Second Circuit routinely and consistently struck down class action waivers in arbitration provisions. As recently as March 2011, the Second Circuit appeared to have brought down the hammer even further, by stating in In Re: American Express Merchants’ Litigation (“AmEx”) that a mandatory arbitration provision—even one that includes an express “class action waiver”—is unenforceable to the extent it “effectively precludes any action seeking to vindicate [plaintiff’s] statutory rights.” 

Despite this dismal outlook for employers in the Second Circuit seeking to enforce class action waivers, the U.S. Supreme Court overturned the Second Circuit’s AmEx decision in June 2013, holding that the concerns with “effective vindication [of statutory rights]” were not implicated because “the fact that it is not worth the expense involved in proving a statutory remedy does not constitute the elimination of the right to pursue that remedy.” In recent days, the Second Circuit has interpreted the Supreme Court’s AmEx decision, which was in the context of an antitrust dispute, to permit employers to enforce class action waivers in arbitration provisions in FLSA cases.

On Monday, August 12, 2013, the Second Circuit issued a much-anticipated decision in Raniere et al v. Citigroup Inc. et al. This case arrived on the Second Circuit’s doorstep after Citigroup asked the district court to compel arbitration of overtime claims brought by the two named plaintiffs who had each signed an agreement to arbitrate FLSA disputes on an individual basis. The district court denied the motion to compel arbitration, finding that FLSA collective action rights could not be waived through an arbitration agreement—Citigroup appealed.

The Second Circuit upheld Citigroup’s class waiver in its individual arbitration policy, finding that the plaintiffs’ main argument—that the FLSA confers a substantive right to bring a collective action that cannot be waived—was foreclosed by the court’s ruling one week earlier in  Sutherland v. Ernst & Young. In Sutherland, the Second Circuit concluded that the Supreme Court’s analysis of a class action waiver in the AmEx decision was equally applicable to a FLSA misclassification claim. Relying on the Sutherland decision, the Second Circuit in Citigroup upheld the class waiver and remanded the matter accordingly.

The Second Circuit’s recent decisions in Citigroup and Sutherland provide a breath of fresh air for employers seeking to enforce class action waiver provisions. Without any tangible signs of FLSA litigation slowing down, employers and their counsel now have two important decisions to rely upon when seeking to enforce class action waivers in wage-and-hour cases.