The United States Supreme Court in Lamps Plus v. Varela, recently held a class action may not be ordered to arbitration unless the parties’ arbitration agreement expressly states that class claims may be arbitrated.
The Ninth Circuit had ordered the parties to arbitrate the plaintiffs’ class claim based on its finding that the arbitration agreement was “ambiguous” as to whether class claims could be arbitrated and, as a matter of traditional contract law, ambiguities are resolved against the drafter of the agreement (in this case, the employer). The Supreme Court rejected the Ninth Circuit’s reasoning and held, under the Federal Arbitration Act, arbitration is purely a matter of agreement between the parties and parties to an arbitration agreement cannot be ordered to arbitrate claims that they did not clearly agree to arbitrate. The Supreme Court decided ambiguity cannot be used to imply that the parties agreed to arbitrate class claims in arbitration because class litigation is not the type of action that is suitable for the streamlined adjudication process traditionally associated with the arbitral forum.
Although Supreme Court precedent holds that silence or ambiguity in an arbitration agreement cannot be a basis for concluding that the agreement covers class claims, the lower court decisions in the Lamps Plus case show that some courts continue to try to find ways to get around favorable Supreme Court precedents. It is, therefore, incumbent upon employers to expressly state in an arbitration agreement that class, collective, and/or representative claims may not be arbitrated and that no arbitrator shall have authority to preside over any arbitration on a class, collective, and/or representative basis on behalf of more than one employee.
The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.
Leave a Reply