Over the last decade, the U.S. Supreme Court has repeatedly recognized the primacy of the Federal Arbitration Act by enforcing the terms of arbitration agreements in the employment, consumer and other contexts – including mandatory arbitration and class action waivers. I might have missed a couple, but since 2010, SCOTUS has ruled that:
- Arbitrators cannot order class arbitration if the agreement is silent, Stolt-Nielson v. AnimalFeeds (2010);
- Challenges to the enforceability of an arbitration agreement must be decided by the arbitrator, Rent-A-Center West v. Jackson (2010);
- The FAA preempts California contract law deeming class-action waivers in arbitration agreements unenforceable, AT&T Mobility v. Concepcion (2011);
- The FAA does not permit courts to invalidate a class-action waivers in arbitration agreements on the ground that the plaintiff’s cost of individually arbitrating exceeds the potential recovery, American Express Co. v. Italian Colors Restaurant (2013);
- The FAA preempts a Kentucky rule requiring that a power of attorney, valid to authorize the execution of contracts generally, must include a separate “clear-statement” to authorize execution of an arbitration agreement, Kindred Nursing Centers Limited Partnership v. Clark (2017)
- The National Labor Relations Act does not trump the FAA, thus prohibiting mandatory arbitration or class action waivers, Epic Systems v. Lewis (2018);
- A court-made “exception” to the rule that arbitrability is a matter for the courts if the claim of arbitrability is “wholly groundless” is inconsistent with the FAA, Henry Schein v. Archer & White (2019);
- Arbitration agreements are not construed against the drafter when the ambiguity concerns whether plaintiff-employees may arbitrate on a class basis, Lamps Plus v. Varela (2019).
Only two decisions arguably when against the interests of employers. In Oxford Health Plans LLC v. Sutter (2013), the Court held that, when an arbitrator determines that the parties to an arbitration intended to authorize class-wide arbitration, that determination survives judicial review under the FAA if the arbitrator was arguably construing the contract. In New Prime Inc. v. Oliveira (2019), the Court rejected a claim for arbitration, upholding an exception in the FFA itself for disputes involving certain transportation workers
Although employers with arbitration agreements are winning overwhelmingly in federal courts, they seem to be losing in court of public opinion. In the #MeToo era, confidentiality provisions in arbitration agreements that have allowed serial sexual harassers to avoid public censure of their behavior, has led to a public outcry against “forced” arbitration. Students at Harvard, Stanford, Yale and other elite laws schools are pressuring Big Law to dump mandatory arbitration. Large employers such as Google and Facebook have publicly abandoned legally enforceable arbitration agreements. First introduced after the Epic Systems decision, the Restoring Justice for Workers Act (H.R. 2749) would prohibit mandatory arbitration in employment disputes.
What is the future of mandatory arbitration in the #MeToo era? Ending mandatory arbitration for all employment claims seems to be an over-reaction. After all, employees do benefit from arbitration. Arbitration is a less public forum for airing employment disputes – which can sometimes be embarrassing and uncomfortable for employees. Do you really want to have to explain your subpar work performance or bad behavior in open court? Also, disputes can be resolved in arbitration more quickly and at less cost. These and other advantages to arbitration is what drove our national policy favoring arbitration in the first place. The advantages of arbitration have not changed.
On the other hand, allowing serial sexual harassers to hide behind confidentiality provisions in arbitration agreements is understandably upsetting, and prevents us from ensuring that such behavior is stopped cold. Perhaps there is a compromise solution – banning confidentiality agreements, for example, but not arbitration agreements themselves, in sexual harassment disputes. Even here, policy needs to be closely and carefully crafted as to not discourage quick settlements. But, let’s now throw out the baby with the bathwater.
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Please join us on Thursday, November 14 at 1:45 p.m. ET as the Labor & Employment Law Practice Group presents Arbitration in the #MeToo Era. The panel will be live streamed on the Federalist Society website.