Raniere v. Citigroup: District Court Holds Collective Action Waiver Unenforceable as Preventing Employees From Vindicating Substantive Statutory Rights under the FLSA

Thank you to Andrew Frisch for his Overtime Law Blog. Mr. Frisch does a truly excellent job of covering FLSA developments, and I recommend his blog highly. Mr. Frisch has written a detailed article on an interesting District Court case, Raniere v. Citigroup Inc. (S.D.N.Y. 11/22/11). I will not review the case in detail but will only note a few important points.

In Raniere, three individuals brought a putative nationwide FLSA collective action for unpaid overtime, alleging that the defendants classified its home mortgage consultants as exempt employees and failed to pay them overtime compensation. The defendant moved to compel individual arbitration, and the Court denied the motion. Slip op. at 2.

First, the Court based its ruling in the "federal substantive law of arbitrability," which "requires federal courts to declare otherwise operative arbitration clauses unenforceable when enforcement would prevent plaintiffs from vindicating their statutory rights." Slip op. at 30. The Court stated that AT&T Mobility v. Concepcion "in no way alters" this federal law of arbitrability. Slip op. at 32.

Second, the Court held that employees cannot waive their right to proceed collectively under the FLSA, and "a waiver of the right to proceed collectively under the FLSA is per se unenforceable." Slip op. at 36.

Third, because the agreement at issue included a "blow-up" provision -- a clause stating that if the collective action waiver is found unenforceable, then the action shall proceed in court, rather than in arbitration -- the Court declined to order class arbitration or to stay the court proceedings. Slip op. at 51.

The opinion is available here. Mr. Frisch's post on Raniere is here.