Earlier this year Denver Labor Law reported on the Supreme Court’s position on mandatory arbitration of independent contractors in New Prime. At the end of April the nation’s highest court issued another employment arbitration decision on the subject of class arbitrations. In Lamps Plus the Supreme Court resolved that employees (and presumably other classes) are not entitled to arbitrate as a class unless the arbitration agreement provides for that form of arbitration in its text. Lamps Plus is another case in recent Supreme Court jurisprudence strengthening the power of businesses to force individuals into private arbitration proceedings out of the public view of the courts.
What is class arbitration in employment law?
Arbitration is a private form of conflict resolution created by contract but enforced as a special type of contract by federal and state laws that require parties to forego their right to bring a lawsuit in court and instead bring claims covered by the arbitration agreement into an arbitration proceeding. Under the governing law, such as the Federal Arbitration Act, parties can generally create any rules they wish for arbitration but as arbitration become more prominent as a compelled condition of consumer and employment relationships courts set minimal standards that require some degree of fairness and due process.
Neither federal nor state arbitration law requires parties to individually arbitrate every claim. Parties could form agreements that allow for class arbitrations in which claims of many parties are brought in a single arbitration action, much like a class action lawsuit in Colorado or federal courts. For example, if several employees alleged workplace harassment by a single employer then they might bring a class action against the employer under federal and Colorado employment law. An arbitration agreement in the workplace may require the parties to arbitrate and the employees could arbitrate as a class if permitted by the agreement.
When does an arbitration agreement allow for class arbitration under Lamps Plus?
Prior to Lamps Plus the Supreme Court had mostly closed the door on class arbitrations unless the arbitration agreement explicitly permitted it. In 2010 the Supreme Court rejected a Ninth Circuit opinion in Stolt-Nielsen S. A. v. AnimalFeeds Int’l Corp., 559 U. S. 662 (2010) authorizing class arbitrations if it was “sound policy.” In Stolt-Nielson the arbitration agreement was silent on the subject of employees arbitrating as a class. Lawyers for both sides stipulated to that fact. The Ninth Circuit decided the agreement could include class arbitrations essentially if it made sense under the circumstances. The Supreme Court disagreed and held the Federal Arbitration Agreement did not allow for such a reformation of the contract.
In Lamps Plus the Ninth Circuit took a different approach. In this case the arbitration agreement did not textually include an authorization for class arbitration. The court applied state contract law to the agreement and held the employees could arbitrate as a class because basic contract law construes ambiguity in the contract against the drafter–the employer. The Ninth Circuit held, as the Supreme Court dissenters agreed, the Federal Arbitration Act did not create a federal contract law that overruled state contract law on the interpretation of a contract.
The Supreme Court majority agreed that the agreement was ambiguous but class arbitration holds a special place in arbitration law that allows it to preempt state contract law interpretations. The conservative majority relied on primarily its own opinions on class waivers in arbitration agreements to decide that an arbitration agreement only allows for class arbitrations if the text specifically allows it.
Why this matters for labor and employment law
For employees Lamps Plus is another step forward in the assault on access to the judicial forum and the ability to cast the bad acts of employers into the sunlight. It was a foregone conclusion that the Court would reject the Ninth Circuit’s position in this case given the conservative majority’s open hostility towards class actions and arbitration. Nevertheless, these decisions make it more difficult for employees to use their collective power to effect change in the workplace–which is another right deeply under attack by right-wing political forces in this country.
Employees should not give up fighting for their rights and pursue remedies of those violations under federal and Colorado law. Labor and employment law still gives employees rights and remedies and fighting for them raises the cost for every other employer to participate in unlawful and appalling behavior. If you believe your employer violated your workplace rights then you should contact Denver employment attorneys right away.