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Employer’s Attempts to Thwart Employees’ Right to Opt-Into a Collection Action Case: A Cautionary Tale

Section 216(b) of the Fair Labor Standards Act (the “FLSA”) requires employers to pay their employees additional compensation at a higher rate for working more than forty (40) hours per week.  In addition, the FLSA requires employers to pay their employees no less than the federal minimum wage for each hour worked. Congress passed the FLSA to protect workers from overbearing practices of employers who had greatly unequal bargaining power over their workers.  See Roland v. Elec. Co. v. Walling, 66 S. Ct. 413 (1946).

In many instances, the overtime and/or minimum wage violations committed by an employer are committed against more than 1 employee.  As such, Congress has expressed a policy that FLSA plaintiffs should have the opportunity to proceed collectively.  See 29 U.S.C. §216(b).  Section 216(b) of the “FLSA” provides a private cause of action against an employer “by any one or more employees for and in behalf of himself or themselves and other employees similarly situated [emphasis added].” 29 U.S.C. §216(b). This means that, in addition to the plaintiff(s) who originally brought the lawsuit, other current or former employees that are similarly situated to the original plaintiff(s) may also join the lawsuit after it has been filed in court.  To join an FLSA collective action, a person must consent in writing to become a plaintiff in the case.  29 U.S.C. §216(b).  This is referred to as opting-in to the action.

“[T]he purpose behind collective actions is to allow for a streamlined and efficient adjudication of the claims of similarly situated plaintiffs.” Hoffman-LaRoche Inc. v. Sperling, 493 U.S. 165, 170–71 (1989).  The FLSA's collective action mechanism (1) reduces the burden on low wage employees through the pooling of resources and (2) allows for the efficient resolution of common issues of law and fact that arise from the same illegal conduct.  Morgan v. Family Dollar Stores, Inc., 551 F.3d 1233, 1264–65 (11th Cir. 2008). 

Although collective action cases “serve an important function in our system of civil justice,” collection actions present “opportunities for abuse as well as problems for courts and counsel in the management of cases.”  Gulf Oil Co. v. Bernard, 452 U.S. 89, 99–100 (1981).  For example, many employers, facing the prospect of having current and former employees join into a collective action case and being exposed to the damages provided for under the FLSA, will attempt to have their employees agree to waive their rights to bring and/or join a collective/class action case.  Many times employers will present their employees with arbitration agreements which requires the employee to bring any claims he or she has in arbitration, as opposed to a court of law.  In addition to requiring the employee to bring his or her claim in arbitration the arbitration agreement will likely contain language foreclosing the employees' ability to initiate and/or participate in a collective and/or class action case.  Many employees simply agree to the terms of these arbitration agreements without reading and/or questioning the agreement because they are usually presented as a condition of employment.

While such agreements are usually legally binding contracts between the employer and employees, when they are presented to the employee in a confusing, misleading, coercive, or in a manner designed to thwart an employees' right to make an informed decision as to whether to join an FLSA collective action, they may be held to be invalid.

Such was the case as recently decided by the United States District Court of Appeals for the Eleventh Circuit in Billingsley v. Citi Trends, Inc., 2014 U.S. App. LEXIS 5468 (11th Cir. Mar. 25, 2014).  In Billingsley, the Eleventh Circuit upheld that district court's finding that the employer, Citi Trends', conduct, in presenting its employees with arbitration agreements for the purpose of preventing them from joining a collective action case filed against it, was abusive and coercive.  The district court invalidated the arbitration agreements signed by Citi Trends' employees, who could have otherwise joined the collective action case that was filed against Citi Trends for violations of the FLSA, and approved notice to be sent to those employees to explain to them that they could still join the collective action case despite their signing of an arbitration agreement.  Citi Trends' conduct was precipitated by a former store manager having filed a collective action complaint against Citi Trends alleging that Citi Trends violated the FLSA by improperly designating its store managers as exempt employees and failing to compensate them for their overtime hours.  The complaint requested the district court to issue a notice of the action to all similarly-situated store managers so they could opt-into the case.

After it was served with the collective action complaint, Citi Trends sent representatives to meet with store managers – who could have joined the collective action case brought on behalf of the current and former store managers who work(ed) for Citi Trends – for the purpose of having them sign arbitration agreements which prevented them from joining the collective action case.  Citi Trends did not inform the store managers of the purpose of the meetings but, rather, told the store managers that the meetings were regarding the issuance of a new employee handbook.  In the meeting the store managers were told that signing the arbitration agreements was a condition of their continued employment.  The store managers later testified that they signed the arbitration agreements because they felt pressured to sign them in order to avoid losing their jobs. 

The district court found that the “purpose and effect” of having the store managers sign the arbitration agreements was “to protect Citi Trends in [the] lawsuit” and to “reduce or eliminate the number of collective action opt-in Plaintiffs in [the] case.”  The district court further found that the entire scheme to have the store managers sign the arbitration agreements was “replete with deceit” and “designed to be intimidating and coercive.”  As such, the district court invalidated the arbitration agreements signed by the store managers and issued notice to them explaining that they could still opt-into the lawsuit if they chose to do so.

Citi Trends appealed the district court's decision to the Eleventh Circuit which held that the district court had authority to prevent abuse and to enter appropriate orders governing the conduct of the parties and did not abuse their discretion in invalidating the arbitration agreements signed by the store managers.  The Eleventh Circuit further held that the courts have a duty to correct the effects of misleading, coercive and improper communications made with potential opt-in plaintiffs.  The Eleventh Circuit cautioned that “[because FLSA plaintiffs must opt-in, unsupervised, unilateral communications with those potential plaintiffs can sabotage the goal of the FLSA's informed consent requirement by planting the slightest seed of doubt or worry through the one-sided, unrebutted presentation of “facts.” “Because the damage from misstatements could well be irreparable, the district court must be able to exercise its discretion to attempt to correct the effects of such actions.”  See Hoffman-La Roche, Inc. v. Sperling, 493 U.S. 163, 170 (1989).  Thus, the Eleventh Circuit found that the district court did not abuse its discretion in correcting the effects of Citi Trends' improper behavior.

Contact our Orlando and Tampa Employment Attorney

Unfortunately the conduct engaged in by Citi Trends is not unheard of when employers are faced with a collective action lawsuit.  Billingsley illustrates the importance of seeking the advice of an employment attorney before signing an arbitration agreement or any other employment agreement.  Prior to signing any employment agreement or arbitration agreement it is important to have an attorney review the agreement to ensure that you are fully informed of all of your rights and that you do not inadvertently waive any rights that you are otherwise entitled to under the FLSA or any other law. If your employer has presented you with an arbitration agreement, or any other employment agreement, call the business and employment attorney at J. Allen Law P.L. in Orlando, who will carefully analyze the agreement and fully advise you of your rights. You can reach us at (407) 205-2330. You may also fill out the online form provided at the top of this page and we will contact you shortly. Your privacy is important to us and we will keep your information confidential.

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