Hunton Employment & Labor Perspectives

As we previously reported, the United States Supreme Court held this past Term in Epic Systems Corp. v. Lewis that class action waivers in arbitration agreements do not violate the National Labor Relations Act.  In the wake of Epic Systems, courts have found that class action waivers are likewise permissible under the FLSA.  These cases make clear that class action waivers are here to stay.

The Supreme Court’s decision, however, left open the question who gets to decide whether an arbitration provision permits class claims when the provision in silent on the issue.  In Jpay, Inc. v. Kobel, the Eleventh Circuit ruled that questions of class arbitrability should be decided by a court unless the arbitration provision vests the arbitrator with the discretion to determine class arbitrability in the first instance.

Specifically, the Eleventh Circuit recognized that class arbitrations are fundamentally a “different type of proceeding” and that the question of whether class wide arbitration is available under a particular arbitration provision is a “gateway question” that effects the entire “scope” of the arbitration.  As such, the Court reasoned that courts should not presume that the parties intended to allow an arbitrator to make such a critical decision unless the arbitration provision “clearly and unmistakably” provides the arbitrator the authority to decide that initial question.  In other words, when a contract is silent on who decides whether class arbitration is permissible under the arbitration provision, a court should rule on that threshold question – not the arbitrator.

After establishing this bright-line rule, the Eleventh Circuit analyzed the arbitration agreement at issue in this case and found that the parties had, in fact, evidenced a clear preference for the arbitrator to decide this threshold question.  Specifically, the Court noted that the provision stated that all claims, disputes and controversies would be resolved through arbitration including that “the ability to arbitrate the dispute, claim or controversy shall likewise be determined in the arbitration.”  The Court found that those statements were an “unequivocal” expression evidencing the parties’ desire to have the arbitrator to decide the issue.