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Do Your Agreements Provide for Waivers of Collective Actions?

Before embarking on a campaign to require that your employees sign away their participation in collective actions, you might want to wait for the 6th Circuit to have its say on the issue.

August 8, 2012
Related Topics: Overtime Eligibility & Pay, FLSA, Downsizing, Layoffs
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Earlier this year, KeHE Distributors underwent a reduction in force. It offered a retention bonus to any sales representatives who would continue their employment for a period of time, as long as they signed a Separation and Release Agreement. Each Agreement contained a "General Release of Claims and Covenant Not to Sue," which included a promise not to join "any class or collective action" against KeHE arising under the FLSA or other federal laws. 69 employees accepted the retention bonus and signed the agreement.

Within weeks, two employees launched collective actions under the FLSA claiming that KeHE unlawfully denied them overtime compensation. In Killion v. KeHE Distribubtor (N.D. Ohio 8/3/12) [pdf] the Court dismissed from the lawsuit any employees who had signed the Agreement.

The plaintiffs argued that because of the relatively small amount of money at stake in any individual wage and hour claim, preventing employees from joining collective actions would gut their substantive rights under the statute. The court, however, disagreed:

This Court recognizes that the ability to form a collective action necessarily implicates policy considerations regarding the enforcement of the FLSA. Because the amount of money at stake may be small, the right to join a larger pool of similarly situated individuals enables the pool to attract counsel who, if victorious, is entitled to recover fees….

Here, this Court has no idea how much money is at stake…. Nor does the record disclose how many potential Plaintiffs would comprise the collective action, whether Plaintiffs can afford to pursue their claims individually, or how much it would actually cost them to pursue individual claims. Moreover , attorneys' fees are mandatory…, which means individual Plaintiffs will still be able to vindicate their rights under the FLSA….

The statute permits a collective action, but it does not require one…. Section 216(b) is clear: Plaintiffs may proceed collectively, not shall. By signing the Agreement they waived that right.

Simple enough, right? An employee is permitted to waive his or her right to file or join a collective action under the FLSA. Killion involved a separate agreement signed as part of a reduction in force. This rule, however, is not limited to post-employment covenants. The same rationale would apply to employment agreements, or other pre-employment documents such as employment applications, offer letters, or other documents signed by an employee incidental to his or her employment.

Of course, Killion is but one opinion of one district court, and this issue is unsettled enough to warrant some cautious deliberation. Before embarking on a campaign to require that your employees sign away their participation in collective actions, you might want to wait for the 6th Circuit to have its say on the issue.

Written by Jon Hyman, a partner in the Labor & Employment group of Kohrman Jackson & Krantz. For more information, contact Jon at (216) 736-7226 or jth@kjk.com.

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