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The applicability of Arbitration Agreements in unpaid overtime collective actions

A district court in Massachusetts recently conditionally certified an unpaid overtime lawsuit under the Fair Labor Standards Act (“FLSA”), which was filed by former solids control workers against Clean Harbors, an oil and gas company. The collective action group consists of “all solids control workers employed by, or working on behalf of, Clean Harbors during the past three years who were classified as independent contractors and paid a day rate.” Romero v. Clean Harbors Surface Rentals USA, Inc., No. 18-10702-PBS (D.C. Mass., September 11, 2019). The Defendant then filed a motion for clarification regarding the collective certification order. 

Clean Harbors contracts with third-party staffing companies to supply solids control workers for certain projects. Clean Harbors contracted with Smith Management and Consulting, LLC, where Smith provides its clients in the oil and gas industry, like Clean Harbors, with contractors to work on oil and gas drilling operations. Clean Harbors and Smith entered into consulting agreements where Smith supplied contractors to Clean Harbors. Part of this consulting agreement was a Master Service Agreement that called for arbitration for any claims “arising under federal, state or local statutory or common law, specifically including those for unpaid or withheld wages and any claim under any other laws governing compensation and overtime such as the [FLSA]…” Id. The defendants sought clarification as to whether the Plaintiff may send notice of the FLSA collective action to Arbitration workers. 

District courts around the country have generated conflicting answers to the question of whether workers who signed arbitration agreements can receive notice of an FLSA collective action. Williams v. Omainsky, No. 15-0123-WS-N, 2016 WL 297718, at *8 (S.D. Ala. Jan. 21, 2016). The Fifth Circuit in JPMorgan held “that district courts may not send notice to an employee with a valid arbitration agreement unless the record shows that nothing in the agreement would prohibit that employee from participating in the collective action.” In re JPMorgan Chase & Co., 916 F.3d 494 (5th Cir. 2019). The Fifth Circuit recognized that workers could not be excluded from receiving notice of an FLSA collective action merely because they signed an arbitration agreement. Instead, it required that district courts conduct a preliminary inquiry into the validity of the arbitration agreements at the conditional-certification stage. Id. 

Here, the defendant submitted evidence that established the validity of the Arbitration Agreements, but the Court said that this is not enough to establish evidence that the Arbitration Agreements are in fact valid. Romero v. Clean Harbors Surface Rentals USA, Inc., No. 18-10702-PBS (D.C. Mass., September 11, 2019). The plaintiff has no way of contesting the validity of the Arbitration Agreements since the plaintiff does not know the identity of the Arbitration workers or the circumstances surrounding when or how the Arbitration Agreements were signed. Id. As such, the Court said it lacked the authority to adjudicate the validity of the Arbitration Agreements so it could not conclude that all the Arbitration workers were subject to valid and enforceable Arbitration Agreements. Id. Given this, the Court did not exclude the Arbitration Workers from receiving notice of the collective action.  

As a result of the Court’s ruling, members of the proposed class will receive notice of the lawsuit and information as to how to join it. If you have been denied overtime pay, contact an attorney today to learn your rights. Josh Borsellino is an experienced overtime attorney that fights for the rights of oilfield workers to recover their lost wages. He offers free consultations and can be reached at 817.908.9861 or 432.242.7118.