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In its last term, the United States Supreme Court began revamping employee arbitration rights, particularly with respect to class actions. With the current term under way, the Supreme Court has cases in front of it that could further alter these rights.
The Court has before it two cases that once again analyze the permissible scope of employer agreements requiring employees to arbitrate actions against their employer. In these cases, the companies are challenging lower court rulings they believe hinder their ability to require arbitration. However, while the Supreme Court’s last decision on arbitration rights favored employers, it is not clear whether this trend will continue with these new cases.
The California case tackling the issue is Lamps Plus Inc. v. Varela, wherein Lamps Plus argues the language in its arbitration provision precludes its employees from arbitrating as a class. However, the Ninth Circuit disagreed, stating the provision was too vague to require individualized arbitration. The Ninth Circuit used California law to reach this result, while Lamps Plus argues Federal law should be used and requires a different result.
While the case may not drastically alter the arbitration landscape the way last term’s decision could, the decisions will still provide guidance to employees and employers alike going forward on what the terms of their contracts need to look like to achieve the desired outcome.
For employers, if the Ninth Circuit decision is upheld, they’ll need to be certain their arbitration agreements are more specific than they may have been thus far. If the employer intends to prevent arbitration as a class and limit employees to individual arbitration, it will need to make this plainly clear in its agreements. Otherwise, employers may still find themselves with the headache of a class action they thought they prevented.