Class Action

Recent Fourth Circuit opinion on FLSA "opt-in" classes: Long John Silver's Restaurants, Inc. v. Cole

By Kimberly A. Kralowec

In Long John Silver's Restaurants, Inc. v. Cole, ___ F.3d ___ (4th Cir. Jan. 28, 2008), the defendant's arbitration agreement, which all employees had to sign, said that the American Arbitration Association's commercial arbitration rules would apply to any dispute. Slip op. at 3-4. The class action provisions of those rules provide for an "opt-out" procedure (as does Rule 23). Id. at 4 (citing AAA Supplementary Rules for Class Arbitrations, Rule 7.)

The plaintiff employees initiated an arbitration proceeding seeking classwide relief for the employer's violations of the Fair Labor Standards Act ("FLSA") (29 U.S.C. §§200 et seq.), which has a statutory "opt-in" class certification procedure (29 U.S.C. §216(b)). Id. at 5. The arbitrator "made a clause constuction award, ruling that the arbitration agreement did not preclude a class arbitration proceeding," then made a later "class award," determining that the parties had waived the FLSA's "opt-in" procedure and that the AAA "opt-out" rule would apply. Id. at 5-6. The employer challenged this ruling in federal district court. The Fourth Circuit held that the arbitrator did not err by holding that the AAA "opt-out" rule trumped the "opt-in" class certification provision of the FLSA:

[T]he text and legislative history of the FLSA reassure us of Congress?s intention that the "opt-in" procedure should apply in arbitration as in court proceedings, [but] they fail to also convince us that Congress expressly intended that the "opt-in" procedure could not be waived by the parties? agreement to an alternate procedure.

Id. at 9. This reminds me of Judge Wilken's ruling that the ordinary "opt-out" procedure of Rule 23 would apply to a UCL "unlawful" prong class action predicated on the defendant's FLSA violations. Bahramipour v. Citigroup Global Markets, Inc., 2006 WL 449132 (N.D. Cal. 2006); see also Harris v. Investor's Business Daily, Inc., 136 Cal.App.4th 28 (2006) (same).

Full post as published by The UCL Practitioner on March 05, 2008 (boomark / &linkurl=http://www.uslaw.com/library/Class_Action/Recent_Fourth_Circuit_opinion_FLSA_optin_classes_John_Silvers_Restaura.php?item=71451' rel=nofollow title='The UCL Practitioner'>email).