Jottings By An Employer's Lawyer

Saturday, March 06, 2004

5th Cir. Answers Some Arbitration Questions in FLSA Context

The pro-arbitration stance of courts continues as the 5th Circuit affirms a lower court's upholding of a challenged arbitration program. Carter v. Countrywide Credit Industries, Inc. (5th Cir. 3/5/04) [pdf]. In doing so they answered some open questions about arbitration programs, although unfortunately, they did not always cite the exact terms of the plan.

First they rejected the argument that the agreement was not enforceable because it precluded them from bringing a class action. Relying on Gilmer, an age discrimination case, which means it has the same class action provision as the FLSA, the court nixed this argument. After the Supreme Court's decision in Bazzle last term, discussed here, most thought that it implied that employers would have the power to bar class actions, and this confirms it in the 5th Circuit at least under the FLSA and the ADEA. Secondly, it rejected the argument of plaintiffs that the restricted discovery was unconscionable. Again their source was Gilmer. Although not citing what the restrictions were the court held the burden was on the plaintiffs to demonstrate that the discovery provisions “will prove insufficient to allow claimants . . . a fair opportunity to present their claims.” A forum selection provision that required the hearing in the district where they worked was found reasonable, at least for these particular plaintiffs.

The court also affirmed the lower court's severance of a fee splitting procedure, although doing so on slightly different grounds. The 5th Circuit found that the unilateral offer of the company to pay all but a $125 filing fee was sufficient to moot the issue, since these plaintiffs would not be able to make the individualized showing required by the Supreme Court that the fees would be so onerous as to prohibit them from pursuing the arbitration.

All in all, yet another strong affirmation that reasonable arbitration programs will be upheld.


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