Liberal Arbitration Policy Of The FAA Doesn't Mean Nonparties Can Be Compelled To Arbitrate.

        The question in Walsh v. Arizona Logistics, Inc. and Larry Browne, No. 20-15765 (9th Cir.  18/21/2021) (Hunsaker, Fletcher, Miller) is "whether a private arbitration agreement binds the Secretary of Labor when bringing a Fair Labor Standards Act (FLSA) enforcement action that  seeks relief on behalf of one  party to the arbitration agreement against the  other party to the agreement." The district court answered nope, and the Court of Appeals affirmed.

        Walsh is Martin J. Walsh, suing in his capacity as Secretary of Labor, to enforce labor laws against Larry Browne and his companies Arizona Logistics and Parts Authority Arizona, an underlying issue being whether  the employees were improperly classified as independent contractors. The workers (that is a neutral term) had arbitration agreements with Browne's companies. Defendants argued that, because the Labor Secretary's enforcement action was brought on behalf of the  workers to obtain a monetary benefit for the  workers, it was actually covered by the arbitration agreements between the employer and the  workers.

        The district court and the Ninth Circuit both relied on EEOC v. Waffle House,  Inc., 534 U.S. 279 (2002) to conclude that the government entity that brought the enforcement action and controlled the action was not bound by the private parties' arbitration agreements. Though the enforcement action under the FLSA  results in financial benefits to individual plaintiffs, it is also for a public purpose, and does not only benefit the private parties.

        COMMENT: Note the similarity in reasoning between this case and California's PAGA cases, which hold that a Private Attorney General Act of 2004 action brought by employees to enforce California's labor laws is not  subject to arbitration. The reasoning in PAGA cases is that the claim really belongs to the  State of California, which is not a party to the arbitration agreement, just as the US Department of Labor is not a party to the arbitration agreement. Yet the US Department of Labor enforcement action is also different than the PAGA claim. The difference is that the FLSA enforcement action is brought by the Department of Labor, whereas the PAGA claim is brought by employees for the benefit of the people of California, as well as  the benefit of the employees. Evidently California legislators concluded that it would be more cost efficient, or at least politically prudent, to make use of private attorneys general, rather than appropriate more money to enforce the law.