Supreme Court Arbitration Dispute May Further Shield Employers
Author: David B. Weisenfeld, XpertHR Legal Editor
October 31, 2018
Do employees have a green light to bring their workplace claims as a class arbitration proceeding if an arbitration agreement does not explicitly bar class actions? The Supreme Court heard arguments on that key question this week in Lamps Plus, Inc. v. Varela, one of three arbitration cases on the Court's schedule this term.
Lamps Plus employee Frank Varela claimed that a data breach subjected his and his co-workers' personal information to a phishing attack. Varela argued that he and his co-workers should be able to initiate arbitration proceedings together as a class. His employment agreement stated that "arbitration shall be in lieu of any and all lawsuits or other civil legal proceedings relating to my employment." It did not say "employment" only included individual claims.
The company's attorney, Andrew Pincus, told the Supreme Court that the employment agreement's silence isn't enough to justify class arbitration. He argued that federal law makes clear that the Federal Arbitration Act (FAA) does not compel a party to submit to class arbitration unless the contract clearly shows that is what was stated.
But Justice Elena Kagan appeared unconvinced. "If I say all furniture, it usually means tables and chairs. If I say all clothing, it usually means pants and shirts," she told Pincus. "And we don't insist that everybody lay out all the subcategories of things."
A divided 9th Circuit Court of Appeals took a similar view, finding that the employees could bring their claims as a class in arbitration based on the language of the agreement. However, in urging the Supreme Court to reverse that ruling, Pincus argued, "The reality is, if a case is sent to class arbitration, it almost certainly is going to settle."
The Supreme Court has broadly interpreted the FAA in favor of employers in previous cases. And during the oral arguments, Chief Justice John Roberts suggested that class arbitration is a "poison pill" that is fundamentally inconsistent with arbitration. "The FAA is not a suicide pact," said the Chief Justice.
Just last May, the High Court ruled in Epic Systems v. Lewis that companies may compel their employees to arbitrate workplace disputes individually rather than as part of a class action. But the language at issue in the present arbitration agreement is a bit different, so it remains to be seen how the justices will rule.
The Court heard another arbitration case earlier in October, New Prime Inc. v. Oliveira, involving whether the FAA's exemption for transportation workers includes independent contractors. Decisions in that case and Lamps Plus v. Varela are expected by early next year.