There’s been a fair amount of buzz about mandatory arbitration of employment disputes lately. The Supreme Court of the United States (SCOTUS) has issued three (yes three) rulings on requiring employees/consumers to submit disputes to binding arbitration. Do you have such a requirement? Are you thinking of adopting one? Is it really such a great idea? Aside from that, can an employee’s attorney get creative and nonetheless find a way around the mandatory arbitration requirement? That’s our topic in this week’s post, so read on.
Let’s first look at the latest Supreme Court rulings from this term:
In Henry Schein, Inc., et al. v. Archer & White Sales, Inc., No. 17-1272 (January 8, 2019) a unanimous Supreme Court held that there was no exception under the Federal Arbitration Act (FAA) allowing courts to disregard a provision in an arbitration agreement delegating authority to an arbitrator — including authority to decide whether an arbitration agreement applies to the dispute at hand.
One week later, in New Prime, Inc. v Oliveira 586 U.S. ____an again unanimous court seemed to reach the opposite conclusion, holding that exceptions in the FAA, principally for those involved in foreign and interstate commerce such as truck drivers, do apply to contractors as they would to regular employees. Specifically, he Court affirmed the First Circuit’s , ruling that: a)judgment of whether FAA exceptions applied was a role for the courts and not arbitration; b) that within Oliveira’s case, the written intent of the FAA covered any type of employer-employee agreement, including the independent contractor construct; and c) Oliveira therefore was not bound by the FAA to seek arbitration.
Before I get to the most recent US Supreme Court ruling, I want to pause here and explain the seeming inconsistencies in these two rulings. Oliveira involved a specific exception under the FAA, whereas, Henry Schein Inc et al v Arch & White Sales did not (at least according to the court). Just wanted to make sure we were clear on that. OK, let’s move on.
Last month, SCOTUS decided Lamps Plus, Inc., et al. v. Varela .This one involved mandatory arbitration of employment disputes, but it included one more wrinkle: the arbitration provisions attempted to include collective and/or class actions in this requirement. In other words, if one or more employees wanted to sue on behalf of themselves and all others similarly situated, those disputes also would be subject to the mandatory arbitration requirement. Essentially the court ruled 5-4 that an employer can have and enforce such requirements, if and only if such provisions explicitly authorize class arbitration proceedings. The arbitration provisions in this case said that “arbitration shall be in lieu of any and all lawsuits or other civil legal proceedings relating to my employment.” The court held that since the arbitration agreement said nothing about class arbitration it did not explicitly waive it and the employer could not compel class arbitration.
OK, so we know that as of now an employer can still compel submission of employment disputes to arbitration: a) providing there is not a specific exception under the FAA and b) regarding class actions, as long as the arbitration provision specifically and explicitly requires class arbitration. That’s helpful, but guess what? There’s more.
Can you write a clear arbitration agreement, ascertain that there are no applicable exceptions to the FAA and still have problems enforcing an arbitration provision? For that matter, can an employee try to opt for arbitration of a dispute and be told s/he can’t arbitration but must file a lawsuit? Wait. Whaaaat? (I can hear what some of you are thinking now: Janette, you’ve really gone batty now, get yourself from fresh air and sun, girl! Hold on. I really am going somewhere with this, so work with me, OK?)
There’s this case from Texas that you might want to note. It’s
Adcock v. Five Star Rentals/Sales, Inc., (Fourth Court of Appeals, Texas, April 18, 2019). Prior to filing suit, the employee’s attorney sent the employer a letter: a) asking whether it had an arbitration agreement; b) demanding that it produce it within 30 days if it did have one; and c) stated that failure to do so would be an agreement not to arbitrate any claims. This employer ignored the letter and after the employee sued, it produced the arbitration agreement. Now here’s where we have a real twist. You’re not expecting this (maybe you are if you remember what I said in the above paragraph): the employee decided he would prefer arbitration and moved to enforce the arbitration provisions. Yes, you read that right. The court wasn’t having it though. It ruled that the letter from his attorney and the employer’s non-response constituted a new agreement that superseded the agreement to arbitrate.
The takeways from the Supreme Court cases are relatively straightforward. Now we have another one: If you get a “silly” letter like the one in Adcock v Five Star Rentals/Sales Inc and if you are looking to enforce an arbitration clause take the letter seriously and don’t ignore it! Of course you can also re-evaluate whether mandatory arbitration is really worth it to you. Many times it isn’t less expensive or more efficient. You might consider instead a provision requiring a non-jury trial, which can provide the advantages you are seeking from arbitration without losing the benefits of litigation. Consider speaking with experts in the field and making an informed decision. Just a thought…
OK, that’s all I’ve got for now…
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