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Coerced Arbitration Agreement Fails To Prevent Class Action

ATLANTA — Even though the Eleventh Circuit recently ruled that arbitration agreements and collective action waivers are enforceable under the Fair Labor Standards Act (FLSA), it has ruled that Citi Trend store managers may still join in an overtime class action against the retailer. The store managers claim Citi Trend, a clothing retailer, required them to work more than 40 hours a week, yet denied the store managers overtime in violation of the FLSA. The company had its employees sign arbitration agreements, which is perfectly legal; however, the method it used to get them to sign the agreements was not. The Eleventh Circuit’s ruling affirmed a lower court decision that prevents Citi Trend from enforcing the arbitration agreements. 

The reason the lower court in Alabama denied Citi Trend’s arbitration claim is because they believe the company used coercive tactics against the store managers in order to get the agreements signed. According to the court’s decision, the company held meetings with its store managers after the lawsuit was filed to encourage them to sign arbitration agreements. Supposedly the “back-room” meetings were to discuss new handbooks policies. But during these meetings, store managers, and only the store managers, were required to sign the agreements. These arbitration agreements would prevent store managers from continuing their class action in court.

Both courts ruled the meetings to be ex-parte communications, or off-the-record communication between parties about a legal matter without their attorneys present, which is not allowed. The courts’ rulings, in this case, are limited to just the arbitration agreements related to this FLSA claim and signed due to coercion. This means that arbitration agreements for other FLSA issues signed in the regular course of employment are likely to be enforceable.

Arbitration agreements are meant to keep disputes between employees and employers out of court. Arbitration does tend to be quicker than court proceedings. They also tend to keep these disputes on an individual basis, so groups of employees cannot sue collectively, settlements are usually confidential, and each employee has to pay for their own case. For these reasons, employers are increasingly using arbitration agreement with their employees. The agreements are like all other contracts and agreements in employment matters, and thus if they are signed under coercion, threat, or are so unfair that enforcing them would be unthinkable, then the court will not enforce them, like in this case.

If you are a store manager required to work overtime without overtime pay and have had to sign an arbitration agreement, contact our top rated team of overtime pay lawyers today at (855) 754-2795 to discuss your situation and rights. Or complete the Free Unpaid Overtime Case Review form on the top right of this page and our experienced legal team will evaluate your options. If we accept your case, we will represent you under our No Fee Promise. This means there are no legal fees or costs unless you receive a settlement.

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