The Third Circuit recently affirmed the decision of a Pennsylvania District Court, holding that a class action filed against the operating companies of a senior care facility, is not subject to arbitration. Plaintiffs filed their putative class and collective action against defendants under the FLSA and Pennsylvania wage and hour statutes. Defendants moved to compel arbitration, based on an arbitration clause, in an employment dispute resolution handbook, which plaintiffs had agreed to as a condition of employment. The clause provided that arbitration is “the only means of resolving employment related disputes.” However, the clause also stated that it “covers only claims by individuals and does not cover class or collective actions.” The district court read the clause as unambiguously carving out class and collective actions from mandatory arbitration and accordingly denied the motion to compel arbitration.
The Third Circuit noted that it was presented with the question of whether an arbitration clause, stating that it “covers only claims by individuals and does not cover class or collective actions,” nonetheless require that a putative class or collective action be sent to the arbitration forum. The Third Circuit held that despite the strong federal policy that favors the arbitration of disputes, that policy has its limits. In short, the Third Circuit held that the text of the arbitration clause is paramount; and hence, the motion to compel arbitration was denied.
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