June 01, 2016 Articles

Inconsistent as to One, Inconsistent as to All: Sometimes It's Too Late to Arbitrate

By Adwoa Ghartey-Tagoe Seymour and Christian J. Bromley

Once a plaintiff files a Fair Labor Standards Act (FLSA) collective action in the Sixth Circuit, the proverbial clock starts ticking on any contractual right to arbitrate with all plaintiffs, even if they have yet to opt in. On August 28, 2015, the Sixth Circuit Court of Appeals issued a decision in Gunn v. NPC International, Inc., 625 F. App'x 261 (6th Cir. 2015), that reiterated a two-factor test courts should employ to determine whether litigants have waived their rights to arbitrate: (1) when the litigant takes action completely inconsistent with an agreement to arbitrate and (2) that course of conduct results in actual prejudice to the opposing party. In Gunn, the appellate court declined to apply the test on an employee-by-employee basis and instead looked only to the franchisor's actions as to the five original FLSA plaintiffs. The defendant franchisor was deemed to have "slept on its rights" to arbitrate as to not only those original employee plaintiffs but also every employee who later opted into the collective action. This broad first-plaintiff approach to FLSA collective actions limits the Sixth Circuit's otherwise strong presumption in favor of enforcing arbitration agreements as set forth in Glazer v. Lehman Bros., Inc., 394 F.3d 444, 450 (6th Cir. 2005).

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