Fair Standards for Labor Arbitration: An Analysis of the FLSA and FAA
Volume 88, No. 1, Fall 2015
By Chloe Keating, Temple University Beasley School of Law, 2016 [PDF]

Subsequent to a long tradition dedicated to freedom of contract and laissezfaire politics, Congress enacted the Fair Labor Standards Act (FLSA) as part of President Franklin Delano Roosevelt’s New Deal package. Through the FLSA, Congress sought to provide American workers with basic statutory rights by implementing minimum standards for employers to follow. To ensure employer compliance, section 216 of the FLSA affords aggrieved employees a cause of action in U.S. district courts, and allows them to pursue claims either individually or as members of a collective action.

Within the past decade, the number of individual FLSA suits and collective actions has risen dramatically. The rise in lawsuits has imposed significant costs on both large and small employers, who assume the expensive and onerous task of confronting employee allegations. To soften the financial blow, many employers settle even frivolous claims to eliminate the public exposure and monetary costs that accompany lengthy litigation. Other employers, hoping to proactively eliminate litigation-related expenses, include arbitration clauses and collective action waivers in their employment contracts.

The Federal Arbitration Act (FAA) governs the rules and policies surrounding arbitral procedure in the United States. Those who drafted the FAA aimed to decrease judicial hostility toward arbitration, as well as provide those frequently engaged in business transactions with a forum for swift and inexpensive resolution of their commercial claims. Since the FAA’s enactment, labor advocates have contested the applicability of the FAA to employment contracts. Similarly, empirical research has shown that arbitration may provide employers with certain advantages not mutually realized by employees. Nonetheless, despite disapproval by many, employers have increasingly integrated arbitration clauses in their standard employment agreements. Moreover, because employers frequently embed collective action waivers within arbitration clauses, the contractual obligation to proceed in arbitration will often simultaneously proscribe pursuing claims as a class.

Though the Court has generally sanctioned the use of arbitration clauses as well as class and collective action waivers, it has not directly addressed the issue with respect to FLSA claims. By evaluating the arguments of both corporate and labor advocates, this Comment explores the practical problems associated with the rise in FLSA litigation and the fairness issues that accompany employment arbitration. In order to confront those questions, the Overview discusses the text, policy goals, and legislative history of the FLSA. The Overview then comprehensively analyzes the FAA, considers the intent of its drafters, and subsequently explores how Supreme Court interpretations of the statute have shaped judicial assessments of FLSA claims in the courts of appeals.

Subsequent to summarizing the legislative and judicial backdrop in the Overview, the Discussion provides suggestions that aim to streamline FLSA procedures at the trial level. These recommendations seek to encourage earlier settlement and eliminate frivolous suits. The Discussion then proposes amendments to the FAA that intend to evenly distribute the procedural advantages of arbitration to both employers and employees.