The parties agree that any and all disputes, claims or controversies arising out of or relating to the employment relationship between the parties shall be resolved by final and binding arbitration.
Employers often include this paragraph, or a similarly worded provision, in employment agreements to, among other things, avoid class action litigation with their employees.
But if an employee wants to initiate a class action despite this provision, will the provision protect the employer from class action litigation?
No, according to a recent U.S. Supreme Court decision.
On April 24, 2019, in Lamps Plus, Inc. v. Varela, the Court ruled that when an agreement is ambiguous on the issue of class arbitration, the parties could not be compelled to arbitrate on a class wide basis. In other words, courts are not permitted to infer that the parties made such an agreement when the agreement is vague about that issue.
In some ways, the Court expanded its prior ruling in Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010), which barred class arbitration when a contractual provision was silent on the issue.
The Court emphasized that consent to arbitration is an essential principle that has guided its analysis on requiring the parties to arbitrate. Neither silence nor ambiguity is sufficient to demonstrate consent.
Only the parties’ express consent to class arbitration is sufficient to protect the employer from class action litigation and to compel the parties to arbitration.
Should you need assistance in reviewing your employment contracts, please contact the Gunster employment law practice at (561) 650-1980.
