Supreme Court finds class arbitrations counter intent of the FAA

Employers welcome high court's approval of class waivers in arbitration agreements.

On the face of it, the Supreme Court’s April 27 decision in AT&T Mobility v. Concepcion was about the validity of commercial arbitration agreements with clauses that preclude class action claims by consumers—specifically a clause in a cell phone contract. But employment defense attorneys immediately seized on the ruling as a possible antidote to the rash of class actions plaguing employers. 

In a 5-4 decision, the nation’s highest court found that the Federal Arbitration Act (FAA) pre-empted a California Supreme Court ruling in Discover Bank v. Superior Court, on which plaintiffs Liza and Vincent Concepcion based their claim. The Concepcions wanted to litigate a dispute they had with AT&T Mobility over a $30.22 charge, even though they had signed an arbitration agreement with a class action waiver. The 2005 Discover Bank decision banned class action waivers in arbitration agreements involving cases with such small claims that they would not be practical to individually litigate. The California high court said such class waivers would insulate a wrongdoer from responsibility and therefore should not be enforced.

Easier to Enforce

One problem some employers encounter with arbitration, Lederman adds, is likely resolved by AT&T Mobility—collateral litigation over the arbitration agreement itself.

Waiver Wording

Batten raises another caveat—the possibility that the National Labor Relations Board (NLRB) may challenge arbitration agreements with class action waivers as violating workers’ rights under Section 7 of the National Labor Relations Act. That section guarantees the right of employees to engage in activities for their mutual aid and protection, and it applies to both union and non-union workforces. In some previous cases, the board has found workers who filed class actions were exercising their Section 7 rights.

Senior Editor

Mary Swanton

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