Hunton Employment & Labor Perspectives

The body of law surrounding class action employment arbitrations received another jolt Monday when the Second Circuit revived an arbitration action with a potential class of roughly 70,000 employees.

In Jock v. Sterling Jewelers, the Second Circuit overturned the district court and upheld an arbitrator’s decision to bind absent class members to the arbitration provisions of the company’s agreement.  The case represents another significant development in the realm of class arbitrations and class waivers, which have been the subject of significant recent litigation.

The Fifth Circuit recently joined a majority of its sister circuits in holding that the question of whether arbitration agreements authorize class arbitration should be decided by courts.

In 20/20 Communications v. Lennox Crawford, the Fifth Circuit held that the availability of class-wide arbitration in a Fair Labor Standards Act case is a “gateway issue” of arbitrability.  The court reasoned that the fundamental differences between individual and class-wide arbitration required judicial determination as to which approach was available, absent “clear and unmistakable” language in the agreement delegating the decision to the arbitrator.

In  a 5-4 decision, the U.S. Supreme Court slammed the door shut on class arbitration unless specifically authorized by the parties.  The decision, Lamps Plus, Inc. v. Varela, reaffirmed the Court’s prior precedent that arbitration is a matter of consent, and that “[s]ilence is not enough” to infer consent to class arbitration. 

The U.S. Supreme Court voted to hear an appeal of the Ninth Circuit’s decision in Varela v. Lamps Plus, Inc.  The Court is expected to decide whether workers can pursue their claims through class-wide arbitration when the underlying arbitration agreement is silent on the issue.  The case could have wide-reaching consequences for employers who use arbitration agreements.

Last week, in American Express Co. v. Italian Colors Restaurant, the United States Supreme Court, in a 5-3 ruling, reversed the Second Circuit and held that a contractual waiver of class arbitration is enforceable under the Federal Arbitration Act (FAA) even if the cost of proving an individual claim in arbitration exceeds the potential recovery.  In holding that a class action waiver in an arbitration agreement is enforceable, even as to federal anti-trust claims, this decision builds upon the trend set in Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662 (2010), AT & T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), and CompuCredit Corp. v. Greenwood, 132 S. Ct. 665 (2012) – that arbitration agreements should be enforced according to their terms even for claims under federal statutes.

The Supreme Court has unanimously upheld an arbitrator’s ruling that a contract that required arbitration of “any dispute” constituted an agreement to class-wide arbitration. The Court’s narrow ruling turns on the parties’ express agreement to allow the arbitrator to decide whether their contract, which contained an arbitration provision but did not mention class proceedings, authorized class arbitration. However, the opinion has significant implications for companies desiring to avoid class arbitration—and class actions generally—through provisions ...