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DOL not bound by employee arbitration pacts, 9th Circuit rules

4 minute read

Signage is seen at the United States Department of Labor headquarters in Washington, D.C., U.S., August 29, 2020. REUTERS/Andrew Kelly - RC2ZNI9ZGU9J

  • 9th Circuit applied to DOL a Supreme Court ruling that says EEOC not bound Logistics co can't compel arbitration of a driver classification lawsuit.

(Reuters) - A U.S. appeals court on Tuesday said the U.S. Department of Labor cannot be forced to arbitrate wage claims brought on behalf of workers who signed arbitration agreements, rejecting arguments by the owner of an Arizona logistics firm.

A unanimous three-judge panel of the 9th U.S. Circuit Court of Appeals said the U.S. Supreme Court's 2002 decision in EEOC v. Waffle House Inc, which said the Equal Employment Opportunity Commission is not bound by employee arbitration pacts, applied equally to claims brought by DOL under the Fair Labor Standards Act.

Affirming a federal judge, the 9th Circuit said Arizona Logistics Inc could not compel arbitration of a DOL lawsuit claiming the company misclassified delivery drivers as independent contractors rather than employees.

DOL did not immediately respond to a request for comment. Nor did Phoenix-based Arizona Logistics, which does business as Diligent Delivery Systems, and its lawyers at Jennings, Strouss & Salmon.

DOL in 2016 sued Arizona Logistics and its owner, Larry Browne, in Phoenix federal court, claiming that by classifying drivers as independent contractors the company had improperly avoided minimum wage, overtime and recordkeeping obligations under the FLSA.

The company also shifted onto the drivers the costs of Social Security contributions, workers' compensation insurance and other payroll taxes and costs, giving itself an unfair edge over competitors, DOL said.

Browne moved to compel arbitration of the claims, saying DOL was bound by agreements the drivers signed to arbitrate any legal disputes with the company.

U.S. District Judge Douglas Rayes in Phoenix last year disagreed, finding that the Supreme Court's reasoning in its Waffle House ruling extended to claims brought under the FLSA.

The high court in Waffle House said the EEOC cannot be bound by employee arbitration pacts because it is not a party to them. The justices also said the commission is the "master of its own case," and while workers reap the benefits of EEOC litigation they have no control over the process.

Browne appealed Rayes' decision, arguing that under the FLSA sums recovered by DOL are secured on behalf of employees and paid directly to them. He claimed the EEOC and DOL are distinct because workers cannot file discrimination lawsuits without first bringing complaints to the commission.

But the 9th Circuit on Tuesday said the EEOC is also authorized to obtain monetary relief on behalf of specific employees, which did not affect the Supreme Court's analysis in Waffle House.

And like the EEOC, DOL's interest in bringing litigation extends beyond relief specific to individual workers to deterring other employers from violating the law.

"Simply put, recovering monies owed to aggrieved individuals does not necessarily indicate that (DOL) is operating solely for the benefit of those individuals," Circuit Judge Danielle Hunsaker wrote.

The panel included Circuit Judges William Fletcher and Eric Miller.

The case is Walsh v. Arizona Logistics Inc, 9th U.S. Circuit Court of Appeals, No. 20-15765.

For DOL: Shelly Trautman

For Browne: Chris Mason of Jennings, Strouss & Salmon

Our Standards: The Thomson Reuters Trust Principles.

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