Over the past week, the United States Court of Appeals for the Second Circuit (“Second Circuit”) has issued two decisions in which it affirmatively held that: (i) a plaintiff cannot use the “effective vindication doctrine” to invalidate a class action waiver of claims brought under the Fair Labor Standards Act (“FLSA”); and (ii) the FLSA does not include a “contrary congressional command” that would prohibit the enforcement of class action waivers. These decisions are a step in the right direction for employers seeking to enforce class action waivers of FLSA claims.

In the first matter, Southerland v. Ernst & Young LLP, Case No. 12-304 (August 9, 2013), the Second Circuit reversed a decision of the Southern District of New York (“Southern District”) in which the Southern District, relying on the “effective vindication doctrine,” denied Ernst & Young’s motion to compel arbitration against a former employee on the grounds that the parties’ arbitration agreement could not be enforced because it would not be financially feasible for the plaintiff to proceed with individual arbitration. In support of its decision, the Southern District, in reliance on In re American Express Merchants’ Litigation, 554 F.3d 300 (2d Cir. 2009), held that the parties’ class action waiver was unenforceable under the “effective vindication doctrine” because the class action wavier would “effectively ban” all proceedings by Southerland against Ernest & Young due to the low-value of her individual claim as compared to the high cost of litigating the claim.

In reversing the Southern District, the Second Circuit held that the United States Supreme Court’s decision in American Express Co. v. Italian Colors Restaurant, 133 S. Ct. 2304 (2013), precluded the application of the “effective vindication doctrine” to invalidate an arbitration agreement. Specifically, the Second Circuit found that a plaintiff cannot use the “effective vindication doctrine” to invalidate a class action waiver because “the fact it is not worth the expense involved in proving a statutory remedy does not constitute the elimination of the right to pursue that remedy.”Southerland, Case No. 12-304 at p. 12 (quoting Italian Colors, 133 S. Ct. at 2310-11) (emphasis in original).

In addition to the foregoing, the Second Circuit took its analysis once step further and held that the FLSA “does not include a ‘contrary congressional command’ that prevents a class-action waiver provision in an arbitration agreement from being enforced by its terms.” Southerland, Case No. 12-304 at p. 13. In reaching this conclusion, the Second Circuit found that a “contrary congressional command” does not exist because: (i) even though the FLSA does allow for the possibility of collective action procedure, the text of the FLSA does not “envinc[e] an intention to preclude a waiver’ of class action procedure;” and (ii) “Supreme Court precedent [such as AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) and Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991)] inexorably lead[s] to the conclusion that the waiver of collective action claims is permissible in the FLSA context.” Southerland, Case No. 12-304 at pp. 9-11. Finally, in reaching this conclusion, the Second Circuit also expressly declined to follow the National Labor Relations Board’s contrary holding in D.R. Horton, Inc., finding that it owed no deference to the D.R. Horton opinion.

In the second matter, Raniere v. Citigroup, Inc., Case No. 11-5213 (Aug. 12, 2013), the Second Circuit reaffirmed its acceptance of class waivers in FLSA cases. In Raniere, the Second Circuit reversed a decision of the Southern District in which the Southern District held that the class action waiver provision in an employment agreement was unenforceable, concluding that “a waiver of the right to proceed collectively under the FLSA is unenforceable as a matter of law.” Raniere v. Citigroup Inc., 827 F. Supp. 2d 294, 314 (S.D.N.Y. 2011). The Southern District further held that the “effective vindication doctrine” and the Second Circuit’s decisionIn re American Express Merchants’ Litigation, 634 F.3d 187, 196 (2d Cir. 2011), “require that if any one potential class member meets the burden of proving that his costs preclude him from effectively vindicating his statutory rights in arbitration, the clause is unenforceable as to that class or collective [action].” Raniere, 827 F. Supp. 2d at 317.

In reversing the Southern District, the Second Circuit, in reliance onSoutherland, held that the class action waiver was enforceable because “no contrary congressional command requires us to reject the waiver of class arbitration in the FLSA context.” Raniere, Case No. 11-5213 at p. 4 (quoting Southerland, Case No. 12-304 at p. 9). The Second Circuit also held, for the same reasons set forth in Southerland, that the Supreme Court’s Italian Colors decision prohibits a plaintiff from using the “effective vindication doctrine” to invalidate a class action waiver of claims brought under the FLSA. Raniere, Case No. 11-5213 at p. 5 (quotingItalian Colors, 133 S. Ct. at 2310-11).

In light of the Second Circuit’s decisions in Southerland and Raniere, employers should feel more confident that arbitration agreements containing class action waivers of FLSA claims will ultimately be deemed enforceable by courts in the Second Circuit.