On the heels of the U.S. Supreme Court’s recent decision in Epic Systems Corp. v. Lewis, a federal judge in South Carolina has ruled that employers can require employees to forfeit their rights to collective action claims in favor of arbitration.
In a July 2 opinion, District Judge David Norton found in Brumfield v. Kindred Healthcare that an opt-in plaintiff from South Carolina, among other plaintiffs, is bound by an arbitration agreement and that its class action and collective action waivers—providing that parties may bring disputes only individually and in arbitration—are enforceable.
The collective action was brought in March by Amanda Brumfield, a licensed practical nurse who last worked in Texas. She and the other plaintiffs, including Andrew Tyler of North Charleston, claimed that Kindred violated the Fair Labor Standards Act by failing to pay them for overtime. In April, Brumfield sought to certify the collective action. Kindred motioned to transfer the entire case to the Eastern District of Texas, or else compel arbitration.
Good law gone bad
Three plaintiffs, including Tyler, signed arbitration agreements and did not argue that those agreements should be found void. Even if they did, Norton noted, the agreements require that all disputes about the validity of the agreement should be determined by the arbitrator rather than the courts.
Brumfield did not sign an agreement, but the court found that she was bound by one because at some point during her employment, she was notified of an arbitration agreement and was informed that it would become binding if she continued employment with Kindred and chose not to opt out within 30 days.
While the plaintiffs did not argue the validity of the arbitration agreements, they did argue that the class action and collective action waivers violate the National Labor Relations Act and are therefore unenforceable. They cited the 7th U.S. Circuit Court of Appeals’ 2016 decision in Lewis v. Epic Systems Corp. in support of that argument, but Norton noted that the Epic Systems decision—holding that an arbitration agreement violated the NLRA because it precluded employees from seeking class or collective remedies to wage-and-hour disputes—was overturned by the Supreme Court on May 21, less than two months after the last Brumfield plaintiff opted in.
“Kindred received an enormous benefit from the U.S. Supreme Court in support of its motion to compel arbitration, and this is likely the first South Carolina federal court opinion enforcing the Supreme Court’s recent decision,” said Amanda Pickens Nitto, an attorney with Robinson Bradshaw in Charlotte who reviewed the decision at Lawyers Weekly’s request.
‘Cast about elsewhere’
In that 5-4 decision the high court ruled, in Norton’s words, that individual arbitration agreements are enforceable under the FAA and that “the NLRA in no way displaces the [FAA].”
Associate Justice Neil Gorsuch wrote that the underlying causes of action in Lewis arose under the FLSA rather than the NLRA and that the Supreme Court held “decades ago” that an identical collection scheme (one borrowed from the FLSA) did not displace the FAA or “prohibit individualized arbitration proceedings.”
In fact, Gorsuch added, every circuit to consider the question has held that the FLSA allows individualized arbitration agreements.
“Faced with that obstacle, the employees are left to cast about elsewhere for help,” he wrote, “suggesting that one statute (the NLRA) steps in to dictate the procedures for claims under a different statute (the FLSA), and thereby overrides the commands of yet a third statute (the Arbitration Act).”
Heavy presumption of arbitrability
Norton also noted the 4th Circuit’s 2013 finding in Muriithi v. Shuttle Exp., Inc., that courts may not alter an “otherwise valid arbitration agreement by applying the doctrine of unconscionability to eliminate a [contract] term barring classwide procedures.”
He noted decades-old policies favoring arbitration, acknowledging federal courts’ authority to evaluate the validity of arbitration agreements.
Here, Norton found nothing in the language of the class and collective action waivers to indicate that they are invalid, and added that Brumfield failed to argue any specific reasons, other than the now-overruled Epic Systems, why the waivers should be found invalid.
“Thus, the court finds the class/collective action waivers to be valid and enforceable, and finds that they prohibits the plaintiffs from bringing this collective action,” Norton wrote.
William “Bill” Nettles of Columbia represented the plaintiffs, and Amy Palesch of Littler Mendelson in Atlanta represented the defendant. Neither could be reached for comment in time for the print version of this story.
The 13-page decision is Brumfield v. Kindred Healthcare Inc. (Lawyers Weekly No. 002-141-18). An opinion digest is available online at sclawyersweekly.com.
Follow Heath Hamacher on Twitter @SCLWHamacher