Addressing an issue of first impression on a procedural matter of growing import in class litigation, the appeals court held notice of a collective action cannot be sent to employees who signed arbitration agreements with class waivers.
District courts may not send notice of a collective action to an employee with a valid arbitration agreement unless the record shows that nothing in the agreement would prohibit that employee from participating in the collective action, ruled the Fifth Circuit, becoming the first court of appeals to rule on the issue. The appeals court found that a district court erred in ordering that notice of a collective action be sent to JP Morgan Chase employees who had signed arbitration agreements and by requiring the bank to provide personal contact information for the “arbitration employees.” However, the court denied Chase’s petition for a writ of mandamus after finding that it had not shown a clear and indisputable right to the writ (In re JPMorgan Chase & Co., February 21, 2019, Smith, J.).
Motion for conditional certification. A Chase bank call center employee filed suit alleging that the employer violated the FLSA by failing to compensate her and other employees for off-the-clock tasks. She moved to conditionally certify a collective action that would include about 42,000 current and former call center employees, and asked the court to send notice to all putative collective members.
Chase responded that about 35,000 (or 85 percent) of all putative collective members had waived their right to proceed collectively by signing binding arbitration agreements. It argued that including the arbitration employees in the collective action and giving them notice of it “would be inconsistent” with the agreements and the Federal Arbitration Act (FAA).
Over the employer’s objections, the district court conditionally certified the collective action, including the 35,000 arbitration employees. The district court reasoned that it could not determine that there was no possibility that putative class members would be able to join until the employer filed a motion to compel arbitration against specific individuals. Thus, the court ordered Chase to produce contact information for all 42,000 putative collective members within two weeks.
Writ of mandamus. The district court denied Chase’s motion to certify an order for interlocutory appeal, and to enter an emergency stay to allow for appellate review. Chase filed a petition for a writ of mandamus, asking the appeals court to exclude from notice of the collective action any employees who signed arbitration agreements waiving their right to participate in such actions.
The court of appeals may issue a writ of mandamus only if three conditions are met. First, the petitioner must have “no other adequate means to attain the relief he desires.” Second, the court “must be satisfied that the writ is appropriate under the circumstances.” Third, the petitioner must demonstrate a “clear and indisputable right to the writ.”
Irremediable error. In this instance, Chase met the first requirement that the error presented “is truly ‘irremediable on ordinary appeal.’” The appeals court observed that orders of conditional certification cannot be appealed under the collateral order doctrine. Further, the district court declined to certify an interlocutory appeal. Moreover, Chase would have no remedy after a final judgment because the notice issue will be moot once it provided the contact information and notice has been sent to the collective members.
Bigger than this case. Next, the appeals court determined that mandamus relief would be especially appropriate here where the issues implicated have “importance beyond the immediate case.” Whether notice of a collective action may be sent to arbitration employees is an increasingly recurring issue and district courts have split over it, and no appeals court has weighed in, the court observed.
Notice to potential plaintiffs only. Although the Supreme Court’s decision in Hoffmann-La Roche Inc. v. Sperling gave district courts discretion to send notice of pending FLSA actions to potential opt-in plaintiffs, it did not explain whether arbitration employees waiving their right to proceed collectively count as “potential plaintiffs.” Applying the popular two-stage Lusardi method to certify a collective action, many district courts wait until the second stage, when discovery is complete, to determine the applicability of arbitration agreements.
Here, the Fifth Circuit held that district courts may not send notice to an employee with a valid arbitration agreement unless the record shows that nothing in the agreement would prohibit that employee from participating in the collective action. The appeals court noted that Hoffmann-La Roche confines district courts’ notice-sending authority to notifying potential plaintiffs, and nowhere does it suggest that employees have a right to receive notice of potential FLSA claims. Accordingly, the district court’s order was incompatible with Hoffmann-La Roche and the Fifth Circuit’s holding in this opinion regarding notice.
“Stirring up litigation.” Chase argued that courts must treat any arbitration employee as ineligible to opt in to an FLSA collective action. It insisted that the district court effectively treated the arbitration agreements as invalid by certifying a collective that includes arbitration employees. The Fifth Circuit agreed that district courts do not “have unbridled discretion” to send notice to potential opt-in plaintiffs. The purpose of giving discretion to facilitate notice is the need for “efficient resolution in one proceeding of common issues.” Notifying arbitration employees reaches beyond the “one proceeding.” Additionally, alerting those who cannot ultimately participate in the collective “merely stirs up litigation,” noted the appeals court.
Validity of arbitration agreement. Identifying employees who are ineligible to participate in a collective action by virtue of having waived that right requires that the court first decide which employees have entered into valid arbitration agreements—a question of state contract law. If there is a genuine dispute as to the existence or validity of an arbitration agreement, an employer that seeks to avoid a collective action, as to a particular employee, has the burden to show, by a preponderance of the evidence, the existence of a valid arbitration agreement for that employee. Where a preponderance of the evidence shows that the employee has entered into a valid arbitration agreement, it is error for a district court to order notice to be sent to that employee as part of any sort of certification. But if the employer fails to establish the existence of a valid arbitration agreement as to an employee, that employee would receive the same notice as others.
Mandamus denied. Still, the appeals court concluded that the district court did not “clearly and indisputably” err, as is required for a writ of mandamus. Because every decision from district courts in the Fifth Circuit has adopted the notice-of-rights theory pressed by the employees, the district court’s errant application of Hoffmann-La Roche suggested that its order did not meet the test for a “clear abuse  of discretion that produces patently erroneous results.” Thus, the district court’s error in the context of the facts and circumstances of this case did not establish that Chase had a clear and indisputable right to a writ of mandamus.
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