5th Circuit Issues Opinion on Class-Wide Overtime Arbitration

Employers are increasing their efforts to force workers to sign arbitration agreements in an effort to shield themselves from class and collective actions for overtime pay.  The Fifth Circuit recently refused to disturb an arbitrator’s decision that an overtime pay arbitration could proceed on a class-wide basis.  

In Sun Coast Resources, Inc. v. Conrad, an hourly fuel tech and driver initiated an overtime arbitration against Sun Coast Resources, which sells and transports diesel, gas, and other oil products. According to the claimant, Sun Coast violated the Fair Labor Standards Act by not including those amounts in his “regular rate” for purposes of calculating overtime. The claimant sought to pursue his FLSA overtime claim against Sun Coast in arbitration on behalf of a class of similarly situated employees.

In a clause construction award, the arbitrator determined that “the agreement . . . clearly provides for collective actions.” Sun Coast asked the district court to vacate the award pursuant to § 10(a)(4) of the Federal Arbitration Act. 9 U.S.C. § 10(a)(4). The district court rejected the application, determining that the arbitrator had interpreted the agreement and that he therefore did not exceed his powers. 

The Fifth Circuit’s review of the arbitrator’s decision was limited, as correctness of the arbitrator’s interpretation is irrelevant so long as it was an interpretation. See, e.g., Oxford Health Plans LLC v. Sutter, 569 U.S. 564, 572 (2013).  Under this limited review, the Fifth Circuit affirmed the District Court’s refusal to vacate the arbitrator’s decision, citing several reasons why the arbitrator interpreted the arbitration agreement.  First, the arbitrator pointed to the breadth of claims subject to arbitration—with few exceptions not applicable here, “any claim that could be asserted in court or before an administrative agency” and “any controversy or claim” arising out of the employment relationship fell within the agreement’s ambit. The breadth of claims the agreement covered, compared to the relatively few it exempted, suggested to the arbitrator that “the parties made a conscious choice” not to exclude class arbitration.

Likewise, the arbitrator noted that the agreement authorized arbitration of “all remedies which might be available in court.” He also noted that “Sun Coast drafted the agreement” but did not “carve out” class proceedings. Both facts suggested to him that class arbitration was appropriate. Finally, the arbitrator noted that the parties agreed that the American Arbitration Association (AAA) rules for employment disputes would govern arbitration. And those rules permit class proceedings. See SUPPLEMENTARY RULES FOR CLASS ARBITRATIONS § 1(a) (AM. ARBITRATION ASS’N 2003) (providing rules “where a party submits a dispute to arbitration on behalf of or against a class or purported class”).

The Fifth Circuit also rejected a second argument made by Sun Coast – that the District Court – not the arbitrator – was required to decide the arbitrability of class proceedings.  The Fifth Circuit found that Sun Coast had waived this issue twice—first, by not presenting it to the arbitrator at all, and second, by not presenting it in a timely manner to the district court.

This decision is important because it provides another reminder that arbitration provisions alone do not give an employer carte blanche to violate state and federal overtime laws.  By filing class and/or collective actions proceedings or by initiating individual arbitrations, workers can still vindicate their legal rights regarding overtime pay.  

About the author: Josh Borsellino represents workers suing for overtime pay.  If you have questions about overtime pay, call Josh at 817.908.9861 for a free consultation.  

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