Once a plaintiff files a Fair Labor Standards Act (FLSA) collective action in the Sixth Circuit, the proverbial clock starts ticking on any contractual right to arbitrate with all plaintiffs, even if they have yet to opt in. On August 28, 2015, the Sixth Circuit Court of Appeals issued a decision in Gunn v. NPC International, Inc., 625 F. App’x 261 (6th Cir. 2015), that reiterated a two-factor test courts should employ to determine whether litigants have waived their rights to arbitrate: (1) when the litigant takes action completely inconsistent with an agreement to arbitrate and (2) that course of conduct results in actual prejudice to the opposing party. In Gunn, the appellate court declined to apply the test on an employee-by-employee basis and instead looked only to the franchisor’s actions as to the five original FLSA plaintiffs. The defendant franchisor was deemed to have “slept on its rights” to arbitrate as to not only those original employee plaintiffs but also every employee who later opted into the collective action. This broad first-plaintiff approach to FLSA collective actions limits the Sixth Circuit’s otherwise strong presumption in favor of enforcing arbitration agreements as set forth in Glazer v. Lehman Bros., Inc., 394 F.3d 444, 450 (6th Cir. 2005).

The defendant, NPC International, Inc., is the world’s largest Pizza Hut franchisee employing 29,000 people in 1,250 Pizza Hut and over 140 Wendy’s franchise locations. In January 2013, five NPC franchise employees brought separate actions alleging FLSA claims for unpaid minimum wages and overtime compensation. Nearly 15 months later, NPC sought to enforce the arbitration clause in the plaintiffs’ employment contracts. In the interim, more than 200 employee plaintiffs opted into the collective actions at different times.

After various responsive actions were taken by NPC throughout 2013 and early 2014, the district court denied NPC’s motion to compel arbitration under its employment contracts because NPC waited 15 months before filing its motion, and this appeal followed. The Sixth Circuit applied its previously crafted two-factor test, which defined “the parameters of [the court’s] scrutiny,” and found that NPC had waived its right to arbitrate under every employment contract at issue in the lawsuit regardless of when the individual employee plaintiff opted into the collective action. See Shy v. Navistar Int’l Corp., 781 F.3d 820 (6th Cir. 2015); Johnson Assocs. Corp. v. HL Operating Corp., 680 F.3d 713 (6th Cir. 2012); Hurley v. Deutsche Bank Tr. Co., 610 F.3d 334 (6th Cir. 2010).

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