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Employer Update Class Action Litigation Involving the Fair Labor Standards Act

Posted by Jeffrey Forbes on Apr 9, 2020 9:00:00 AM

 

No employer wants to face a class action lawsuit. Defending a class action lawsuit is an extremely costly endeavor, one where the legal fees begin mounting very early in the process. Such lawsuits often take far longer than traditional litigation to reach a resolution. Cases can easily take five to ten years before the final trial begins. These two factors often force class action defendants into settlement early in the proceedings if they cannot win dismissal of the case at one of the preliminary proceedings.

An Increase In Cases Related To FLSA

Over the past decade, class action litigation involving the Fair Labor Standards Act reached new heights. New records were set for the number of class action lawsuits filed in this category every year from 2015 to 2018. Furthermore, the number of class action suits under the Fair Labor Standards Act that received an initial conditional class certification set new records each year during that period, as did the number of cases that survived decertification motions filed by the defense. (One of the early stages in a class action lawsuit involves the Judge determining whether to certify the class, thus qualifying the plaintiffs to bring the suit as a class action. This determination is based on the size of the putative class, the amount of evidence and claims in common amongst the class, and various factors related to equity and judicial economy. The fight over class certification itself can cost millions in legal fees and take years).

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FLSA vs NLRA

However, in 2019, the Supreme Court issued its decision in Epic Systems Corp. v. Lewis. This decision ruled that employers could require that employees arbitrate Fair Labor Standards issues and as part of the arbitration process bar collective actions such as a class action lawsuit. Several circuit courts had attempted to address this issue, producing a circuit split in which some appellate courts had held this type of conduct acceptable and other appellate courts had ruled that it violated the National Labor Relations Act.

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Epic Systems Ruling Effecting Other Cases

The early trends are positive for employers. For the first time in a long time, the number of class action lawsuits filed under the Fair Labor Standards Act dropped in 2019. Additionally, statistics show that more cases are being diverted from the court system prior to class certification, likely a result of courts compelling parties to attend arbitration due to the Epic Systems ruling.

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Advice For Employers

Employers need to consider adopting mandatory arbitration provisions in their employment agreements and including class action waivers in those provisions. Future legislative action at the federal level may impact the long term viability of this strategy, but for now, it can be a way for employers to avoid costly litigation. Having said that, arbitration provisions are not ideal for all employers and employers should consider the various benefits and disadvantages of arbitration before rushing to implement new employment agreements.

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Topics: For Your Business, HR Insights, Risks For Businesses, Laws for Employers