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Eleventh Circuit: Arbitration Fee Clause Violates FLSA

November 26, 2019 | Posted in : Expenses / Costs, Fee Agreements, Fee Clause, Fee Entitlement, Fee Issues on Appeal, Fee Shifting, Fee Statute, Prevailing Party Issues

A recent Law 360 story by Adam Lidgett, “11th Circ. Says Arbitration Fee Clause Violates FLSA,” reports that a clause in a Florida pest-control company’s employment agreement requiring each side to cover their own attorney fees in arbitration can’t be enforced because it conflicts with a Fair Labor Standards Act (FLSA) provision that allows workers who win suits to recoup legal costs, the Eleventh Circuit ruled.

A three-judge panel agreed with a lower court’s finding that the attorney fee and cost provisions in the arbitration pact contained in employee commission agreements allegedly signed by a trio of PIP Inc. technicians weren’t enforceable.  The panel said that under the FLSA, workers are allowed to collect attorney fees and expenses as part of a possible award.  “A mandatory ‘pay your own’ fees and costs clause removes the arbitrator’s ability to award a plaintiff what is provided by statute if the plaintiff is successful,” the panel wrote.

The lower court had found that the attorney fee and cost provision’s inclusion had doomed the entirety of the arbitration clause.  But the appellate panel said that the lower court needs to take another look at whether Florida law allows for the offending language to be severed from the rest of the arbitration provision.  “Our law does not support that an arbitration provision is unenforceable in its entirety if it contains an offending clause and lacks a severability provision,” the appellate panel wrote.  “The district court did not go on to the next step to address whether the unenforceable clauses were severable as a matter of Florida law.”

According to a single-count, third amended complaint from the former PIP service technicians, the company improperly didn’t pay them time-and-a-half when they worked more than 40 hours a week.  They sought damages and also interest, and attorney fees and costs, according to court documents.  The company pushed for arbitration in January, citing the arbitration clause in the employee commission agreements it said the workers signed.

But U.S. Magistrate Judge Barry S. Seltzer found in February that the arbitration provision couldn’t be enforced because it denies plaintiffs their right under the FLSA to collect fees and costs and because there wasn’t any severability provision, according to court documents.  About a month later U.S. District Judge Federico A. Moreno adopted the magistrate judge’s recommendation in the case and denied the company’s bid to compel arbitration.