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Federal appeals court allows arbitration for FLSA claims

A decision from the U.S. Court of Appeals for the 2nd Circuit, which includes New York, has affirmed the legality of employer-imposed arbitration requirements for claims involving the Fair Labor Standards Act. Although a previous ruling from the 2nd Circuit had required court supervision of settlements reached through arbitration, the panel of judges did not view this requirement as a ban on arbitration. The judges did not link judicial review of settlements with a prohibition on alternative dispute resolution methods.

The case before the appeals court had drawn upon the previous decision regarding court supervision of arbitrated settlements. The court rejected the argument of the plaintiff because the goal of supervision was to promote fairness within a settlement claim and not dictate the forum for reaching the settlement agreement.

Despite the 2nd Circuit's allowances for arbitration, opinions have been inconsistent among other circuits. The lack of clarity has sent the issue to the Supreme Court of the United States. The highest court is currently considering whether employers can enforce provisions in arbitration agreements that prevent FLSA claims from becoming class action cases. Unless the Supreme Court decides otherwise, employers in New York could expect to apply arbitration agreements to FLSA claims.

The FLSA includes wage and hour laws that often form the basis of disputes between employers and workers. An owner or executive of a company confronted by an FLSA claim could consult an attorney about how to respond. To protect the employer from liability, an attorney could document the reasons behind an employer's decision about the classification of a position or rate of pay. With legal representation, an employer could obtain specific legal advice when negotiating the terms of a settlement or denying allegations about unpaid overtime or paying below minimum wage.

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