Another Class Action-Related Gift to Employers from the U.S. Supreme Court

Nearly a year after its decision in Epic Systems Corp. v. Lewis, finding that class and collective action waivers contained in employer arbitration agreements are lawful and enforceable under the Federal Arbitration Act, the U.S. Supreme Court has spoken once more on the topic. This week, in Lamps Plus Inc. v. Varela, the high court ruled that arbitration agreements must specifically contemplate class arbitration for that process to be invoked.

The upshot is that an employer with a valid arbitration agreement not containing an explicit class action waiver can compel alleged class action claims to individual arbitration (assuming, of course, that the given contract does not specifically provide for class arbitration). In making its determination, the Court clarified that ambiguity in an arbitration agreement is not enough to evidence consent to class arbitration. No doubt, the justices’ 5-4 vote represents yet another employer-friendly decision.

Notwithstanding the foregoing, and as we previously pointed out after the Epic Systems ruling was published, employers should proceed with caution despite the good news in Lamps Plus. Remember, a variety of grounds can exist to render an arbitration agreement unenforceable – whether or not it contains a class or collective action component. And despite the Court’s determination in Lamps Plus requiring no ambiguity in a contract regarding a party’s capacity to pursue class arbitration, state and local law may specifically permit alternate ways to facilitate collective or enforcement actions (such as California’s Private Attorneys General Act).

As a practical matter, employers in the wake of Lamps Plus (and Epic Systems) should be certain that arbitration provisions are drafted in compliance with current law. That being said, assuming your company does not want to permit class-wide arbitration, DO NOT include language in your agreements that references class claims (other than a class action waiver).

If interested in a deeper dive on arbitration agreements and class or collective actions, the labor and employment lawyers at Michelman & Robinson, LLP are just a phone call or email away. In the meantime, we are here to help craft effective and enforceable arbitration agreements that will stand up to the scrutiny anticipated in the aftermath of Lamps Plus and Epic Systems.

This blog post is not offered as, and should not be relied on as, legal advice. You should consult an attorney for guidance in specific situations.