Walthour v. Chipio Windshield Repair, LLC

• Decision Date: 27 February 2013
• Docket Number: Civil Action No. 1:12–CV–1491–AT.
• Citation: 944 F.Supp.2d 1267
• Parties: Ashley WALTHOUR, and Kevin Chappell, on behalf of themselves and all others similarly situated, Plaintiffs, v. CHIPIO WINDSHIELD REPAIR, LLC, Kingco Promotions, Inc., Levaughn Hall, and John Does I–X, Defendants.
• Court: U.S. District Court — Northern District of Georgia

944 F.Supp.2d 1267

Ashley WALTHOUR, and Kevin Chappell, on behalf of themselves and all others similarly situated, Plaintiffs,

v.CHIPIO WINDSHIELD REPAIR, LLC, Kingco Promotions, Inc., Levaughn Hall, and John Does I–X, Defendants.

Civil Action No. 1:12–CV–1491–AT.

United States District Court,

N.D. Georgia,

Atlanta Division.

Feb. 27, 2013.

Stephen M. Katz, The Katz Law Group, LLC, for Plaintiffs.

Joseph Michael English, Taylor English Duma LLP, for Defendant, Chipio Windshield Repair LLC.

Lewis P. Janowsky, Rynn & Janowsky, Michael David Kata, Wargo & French LLP, for Defendant, Kingco Promotions, Inc.

ORDER

AMY TOTENBERG, District Judge.

This case brought pursuant to the Fair Labor Standards Act, 29 U.S.C. § 216(b) (“FLSA”) is before the Court on Defendants' Joint Motion to Compel Arbitration and Motion to Dismiss Plaintiffs' Complaint or, Alternatively, Motion to Stay Proceedings (hereinafter referred to as “Motion to Compel Arbitration”) [Doc. 6]. The issue before the Court, whether a contractual waiver of the right to bring a collective action in a mandatory arbitration agreement is enforceable under the FLSA, is a topic of increasing debate among federal district and appellate courts. The Court finds Plaintiffs' arguments against compelling individual arbitration to be persuasive. However, as the Eleventh Circuit has upheld the enforceability of similar arbitration provisions in FLSA cases, albeit on different grounds than those presented in the instant case, the Court concludes that it must GRANT Defendants' Motion to Compel Arbitration and Motion to Dismiss [Doc. 6] so as to permit the Court of Appeals itself to review the distinct issues presented here more closely.

I. BACKGROUND

Plaintiffs Ashley Walthour and Kevin Chappell brought this putative FLSA collective action against Defendants alleging that they, and other similarly situated current and former employees, were improperly misclassified as exempt from the FLSA's overtime requirements and were required to work in excess of 70 hours per week without overtime pay.¹ During their employment with Defendants each of the Plaintiffs executed a “Mandatory Arbitration of All Claims Policy” (hereinafter referred to as “the Arbitration Agreement”). The Arbitration Agreements provide, in part, that Plaintiffs, as “Employees”, and Kingco Promotions, Inc., as “Employer,” agreed as follows:

[1] that all claims, disputes, controversies, or disagreements of any kind whatsoever arising out of or relating to any employment at-will agreement entered into between the parties and/or Employee's employment with Employer, and which may have occurred prior to or after entering into this arbitration agreement (other than claims Employee may have for workers' compensation or unemployment insurance benefits), shall be submitted to binding arbitration. Employer and Employee agree that the requirement to arbitrate shall also apply to any claim that may arise out of or relate to Employee's employment and which Employee may assert against Employer's employees, officers, directors, agents, suppliers or service providers, in their capacity as such, whether an individual or entity; and

[2] the arbitrator will have no authority to consider a class action by one or more employees or otherwise preside over any form of a representative or class proceeding. The decision of the arbitrator shall be final, conclusive and binding on the parties to the arbitration. The award of the arbitrator may be enforced in any court of competent jurisdiction. BY SIGNING THIS AGREEMENT, EMPLOYEE AND EMPLOYER ARE EACH GIVING UP HIS/HER/ITS RIGHT TO A JURY TRIAL AND HIS/HER/ITS RIGHT TO PARTICIPATE IN A CLASS ACTION BECAUSE ALL CLAIMS WILL BE RESOLVED EXCLUSIVELY THROUGH ARBITRATION. EMPLOYEE AND EMPLOYER AGREE THAT EACH MAY BRING CLAIMS AGAINST THE OTHER ONLY IN HIS/HER/ITS INDIVIDUAL CAPACITY AND NOT AS A PLAINTIFF OR CLASS MEMBER IN ANY PURPORTED CLASS OR REPRESENTATIVE PROCEEDING.

(Doc. 6–2 at 4–5.) Defendants seek to compel arbitration of Plaintiffs' FLSA claims pursuant to the Arbitration Agreements.

II. ANALYSIS

In support of their Motion to Compel Arbitration, Defendants assert that requiring mandatory arbitration of Plaintiffs' FLSA claims is supported by Supreme Court and Eleventh Circuit precedent and does not run afoul of the congressional intent in enacting the FLSA. In response, Plaintiffs argue a contractual waiver of their statutory right to a collective action under 29 U.S.C. § 216(b) of the FLSA is unenforceable as a matter of law. Specifically, Plaintiffs assert the following in support of the argument that the FLSA's collective action provision creates a non-waivable substantive right:

(1) the statutory language refers to the collective action provision as a right, not as a procedure;

(2) § 216(b) is integral to the FLSA, making the collective action provision non-waivable;

(3) courts have held that all other provisions of § 216(b)—those providing the remedies of minimum wage and overtime backpay, liquidated damages, and attorney's fees—are substantive rights that cannot be contractually waived;

(4) the right to proceed collectively under the FLSA is not simply procedural because the Act contains its own collective action provision instead of relying on Fed.R.Civ.P. 23's class action procedure;

(5) the Department of Labor, the agency charged with enforcement of the FLSA, has taken the position that the collective action provision is a substantive non-waivable right; and

(6) the legislative history of the Act demonstrates that the right to proceed in a collective action to enforce the provisions of the FLSA is integral to the remedial purposes of the Act.

Defendant's Arbitration Agreement here requires its employees, as a condition of employment, to submit their claims to mandatory arbitration and requires the employees to give up their right to proceed as a class of one of more employees in any proceeding. The Court considers the enforceability of the Arbitration Agreement under the provisions of the Federal Arbitration Act, the Fair Labor Standards Act, and the relevant case law addressing mandatory arbitration agreements in the employment context below.

A. The Federal Arbitration Act

The validity of an arbitration agreement is generally governed by the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1 et seq., which was enacted in 1925 to reverse the longstanding judicial hostility to arbitration agreements and to place arbitration agreements upon the same footing as other contracts. Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991); Caley v. Gulfstream Aerospace Corp., 428 F.3d 1359, 1367 (11th Cir.2005). “The FAA embodies a liberal federal policy favoring arbitration agreements.” Caley, 428 F.3d at 1367 (internal quotations omitted) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)). The Supreme Court has long recognized the arbitrability of federal statutory claims, noting that “[b]y agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum.” Gilmer, 500 U.S. at 26, 111 S.Ct. 1647.

Under the FAA, arbitration agreements are “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of the contract.” 9 U.S.C. § 2. An agreement to arbitrate federal statutory claims is generally enforceable unless “Congress has evinced an intention to preclude a waiver of judicial remedies for the statutory rights at issue.” Gilmer, 500 U.S. at 26, 111 S.Ct. 1647. Where such a Congressional intention exists, it may be shown by reference to the text of the statute, its legislative history, or “an ‘inherent conflict’ between arbitration and the [statute's] underlying purposes.” Id. The burden is on the party opposing arbitration to show that Congress intended to preclude waiver of a judicial forum in favor of an arbitral forum for the statutory claims. Id. “The Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolvedin favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.” Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. at 24–25, 103 S.Ct. 927.

B. The Fair Labor Standards Act

The FLSA was enacted as part of President Franklin D. Roosevelt's New Deal legislation in 1938. According to the Supreme Court in Brooklyn Sav. Bank v. O'Neil, “the prime purpose of the [FLSA] was to aid the unprotected, unorganized and lowest paid of the nation's working population; that is, those employees who lacked sufficient bargaining power to secure for themselves a minimum subsistence wage.” 324 U.S. 697, 707 n. 18, 65 S.Ct. 895, 89 L.Ed. 1296 (1945) (citing 81 Cong. Rec. 7652, 7672, 7885; 82 Cong. Rec. 1386, 1395, 1491, 1505, 1507; 83 Cong. Rec. 7283, 7298, 9260, 9265; H. Rep. No. 1452, 75th Cong., 1st Sess., p. 9; S. Rep. No. 884, 75th Cong., 1st Sess., pp. 3, 4), reh'g denied,325 U.S. 893, 65 S.Ct. 1189, 89 L.Ed. 2005 (1945). “The statute was a recognition of the fact that due to the unequal bargaining power as between employer and employee, certain segments of the population required federal compulsory legislation to prevent private contracts on their part which endangered national health and efficiency and as a result the free movement of goods in interstate commerce.” Id. at 706–707, 65 S.Ct. 895.

In order to effectuate the comprehensive remedial purposes of the FLSA, § 216(b) provides that any employer who violates the minimum wage and overtime provisions of the Act is liable to their employees for unpaid minimum wages or overtime compensation, additional liquidated damages, attorney's fees and expenses. Employers...