- Employer and employee enter into an arbitration agreement that provides that an arbitrator (not a federal district court) will decide the enforceability of the agreement.
- Dispute arises - employee alleges employment-discrimination and files a claim in federal district court.
- Employer files a motion to compel arbitration under the agreement.
- Employee says the agreement is "clearly unenforceable in that it is unconscionable."
Without boring you with the gory Federal Arbitration Act (FAA) details, let's cut to the holding. It's a two-parter with a subtle distinction:
If a party challenges the validity . . . of the precise agreement to arbitrate at issue, the federal court must consider the challenge before ordering compliance with that agreement.Example: If the clause mandating that enforceability of the agreement be determined by an arbitrator was itself entered into via fraud in the inducement - then the Court decides. However,
if a party challenges the enforceability of the agreement as a whole, the challenge is for the arbitrator.Get it? Challenge to the enforceability of the agreement to arbitrate enforceability -> Court. Challenge to agreement as a whole -> arbitrator.
For previous Lawffice Space coverage of this case, see: Arbitrability of Arbitrability Determination Under Arbitration Act Hits SCOTUS, and Arbitration Agreement Unconscionability Determination Hits SCOTUS.
Posted by Philip Miles, an employment lawyer with McQuaide Blasko in State College, Pennsylvania.