Second Circuit Rules FLSA Doesn’t Bar Class Waivers

The Second Circuit recently ruled that the Fair Labor Standards Act ("FLSA") does not prohibit the enforcement of class action waivers in arbitration agreements with employees, even if the waivers remove the financial incentive for individual employees to pursue claims. In doing so, the Second Circuit joined the Fourth, Fifth, and Eighth Circuits in allowing waiver of FLSA collective action claims.

In Sutherland v. Ernst & Young LLP, the plaintiff filed a class action for unpaid overtime wages, despite an arbitration agreement barring class or collective action arbitration. The defendant moved to compel arbitration. The plaintiff claimed that requiring individual arbitration would impermissibly prevent her from "effectively vindicating" her rights under the FLSA and New York state law. The plaintiff argued that the cost of pursuing an individual claim, estimated at approximately $200,000, would far exceed her potential recovery, which was less than $2,000.