Individual Arbitration is the New Default Rule Where an Agreement is Ambiguous as to Class Action
By Beth Florkowski of Fausone Bohn, LLP posted in Business on Friday, August 2, 2019.
In a blow to employee advocacy groups, the United States Supreme Court handed down a decision in Lamps Plus, Inc. v. Varela, which held that class action arbitration is only available when an arbitration agreement explicitly says so.
In Lamps Plus, Mr. Varela, an employee, filed a class action lawsuit against his employer, Lamps Plus, in federal court. Lamps Plus, relying on its standard employee arbitration agreement, sought to compel arbitration. The arbitration agreement was ambiguous as to whether an arbitration could be filed as a class action, rather than as an individual action. The lower court, thus, compelled Lamps Plus to arbitrate the claim as a class action.
The Supreme Court reversed the lower court. In other words, each employee would have to bring an arbitration claim individually, rather than as a group. The Court reasoned that “Arbitration is strictly a matter of consent.” Lamps Plus, Inc. v. Varella, Docket No. 17-988, at p.7 (April 24, 2019). Therefore, a court cannot infer class action arbitration into an agreement unless there is a “contractual basis for concluding that the party agreed to do so.” Id. at p 8.
If an arbitration agreement is ambiguous or silent as to class actions, then individual action is the default rule. Even though this case was a win for the employer, this whole headache could have been avoided if the business had consulted a skilled employment law attorney for a contract review. When is the last time you had an attorney review your employment contracts?