Relief for Employers Arrived When High Court Closed Door on Class Arbitration
This article was published by the Daily Business Review on Monday, May 6, 2019.
Mandatory arbitration has long been a fixture in employment agreements. However, there has been confusion over whether this includes the right to bring claims as a class,” write Dietzen and Platt Rady. “On April 24, the U.S. Supreme Court closed the door on class arbitration in its decision in Lamps Plus v. Varela.”
In the case, the question before the Supreme Court was whether the Federal Arbitration Act (FAA) foreclosed a state law interpretation of an arbitration agreement that would authorize class arbitration based solely on general or vague language commonly used in arbitration agreements. “The FAA imposes certain rules on arbitration while generally deferring to state law for interpretation of such agreements,” Dietzen and Platt Rady explain. “One fundamental aspect of the FAA is that arbitration must be a matter of consent by both parties. Lamps Plus argued that means affirmed, not inferred, consent.”
This case has far-reaching implications, as there are currently tens of thousands of employment agreements in force that fail to consider the possibility of a class action. If the California interpretation held sway, every one of those agreements could be found as authorizing a class. Fortunately for employers, the Supreme Court disagreed with California.
Although not necessary, it is advisable that companies audit existing agreements to see whether they are explicit in waiving class arbitration. “In Florida, we also like to add a clause that says nothing in the agreement gives preference for or against the drafter – the employer,” the attorneys state. “This avoids being in the same predicament Lamps Plus was in wherein the lower court relied on the legal maxim that any ambiguity is interpreted against the drafter of the agreement.”