Brief Fact Summary. The Plaintiffs-Appellees, Sharon Floss (Floss) and Kyle Daniels (Daniels) (Plaintiffs), two former employees of the Defendant-Appellant, Ryan’s Family Steak House, Inc. (Defendants), brought an action against their former employer under Fair Labor Standards Act (FLSA). The Defendant responded that the Plaintiffs waived their right to bring such action in federal court by agreeing to arbitrate all employment disputes.
Synopsis of Rule of Law. A court will permit parties to litigate a claim in federal court, rather than enforce an arbitration agreement, where the forum for arbitration lacks rules and procedures suitable for the resolution of federal statutory claims.
Issue. Whether employees waive their rights to bring actions in federal courts under the ADA and FLSA by agreeing to arbitrate all employment disputes.
Held. No. The Court of Appeals for the Sixth Circuit reversed the district court’s order requiring Floss to arbitrate her claim and affirmed the district court’s order refusing to require Daniels to submit his claim to arbitration. The Court reviews de novo a district court’s decisions regarding both the existence of a valid arbitration agreement and the arbitrability of a particular dispute. In deciding whether to compel arbitration of a federal statutory claim, the Court initially considers whether the statutory claim is generally subject to compulsory arbitration. If the statutory claim is not exempt from mandatory arbitration, we next consider whether the parties have executed a valid arbitration agreement and, if so, whether the statutory claim falls within the scope of that agreement Not all statutory claims are amenable to mandatory arbitration. In creating a statutory cause of action, Congress may choose to mandate a judicial forum for its resolution. Such intent is typically evidenced in the statutory text, legislative history, or by an “inherent conflict” between arbitration and the underlying purposes of the statute. Even if arbitration is generally a suitable forum for resolving a particular statutory claim, the specific arbitral forum provided under an arbitration agreement must nevertheless allow for the effective vindication of that claim
Discussion. Ultimately the court in ruling on whether the arbitration agreements are binding waivers of federal rights, the court is called on to decide whether public matters should be resolved in private settings. The court’s answer is no, because it found that under arbitration of the specific federal rights in this case (i.e. freedom from employment and disability discrimination) there would be no assurance that the public interest behind the federal rights were satisfied.