What’s New?

U.S. Supreme Court Upholds Class Action Waivers in Employment Arbitration Agreements (Again)

by D. Gregory Valenza | | April 24, 2019

The U.S. Supreme Court held in Stolt-Nielsen S. A. v. AnimalFeeds Int’l Corp., 559 U. S. 662 (2010), that an arbitration agreement, silent about class-wide arbitration, authorizes only individual arbitration claims included in the arbitration contract.  The rationale is as follows.  1) Arbitration is a matter of consent and 2) an agreement’s silence about class-wide arbitration is not consent.  

Now, in Lamps Plus, Inc. v. Varela, (here) the Court considered whether an arbitration agreement allows class-wide arbitration when its terms are not “silent” but rather ambiguous.  Unlike the Stolt-Nielsen case, Lamps Plus is an employment law matter.  Like in Stolt Nielsen, the Court held that class=wide agitation must be expressly agreed-to. 

Plaintiff Varela was the victim of identity theft, after hackers spoofed a company email account and enticed disclosure of certain employees’ sensitive financial information. He signed an arbitration agreement that did not authorize or prohibit class claims. But the agreement’s language was broad regarding what claims were arbitrable. Based on that, the 9th Circuit held that the district court could find it included class claims. The 9th Circuit applied a California law rule, “ambiguity is construed against the drafter” of a contract.

  The Court, 5-4, held that the 9th Circuit was wrong. 

Stolt-Nielsen explained that there is “reason to doubt the parties’ mutual consent to resolve disputes through class-wide arbitration.” 559 U. S., at 687, 685–686. And for that reason, we held that courts may not infer consent to participate in class arbitration absent an affirmative “contractual basis for concluding that the party agreed to do so.” Id., at 684. Silence is not enough; the “FAA requires more.” Id., at 687. 

Our reasoning in Stolt-Nielsen controls the question we face today. Like silence, ambiguity does not provide a sufficient basis to conclude that parties to an arbitration agreement agreed to “sacrifice[] the principal advantage of arbitration.” Concepcion, 563 U. S., at 348. 

So, what does this all mean?

First, as previously discussed by the Court and us, employers may avoid class-wide arbitration if the Federal Arbitration Act applies to the dispute. (Sometimes the FAA does not apply. So check with your counsel on this).

Second, it is not necessary to include a class waiver in an arbitration agreement to avoid class-wide arbitration.  

Third, if I were a lawyer for a company, I would recommend a class-wide waiver anyway.  It is the arbitration agreement’s chicken soup: It couldn’t hurt. It might help.  As I’ve said before, this case will not help employers avoid “representative” actions such as PAGA claims,





Never Miss a Post
Please enter all required fields Click to hide
Correct invalid entries Click to hide