Friday, July 8, 2011

AT&T v. Concepcion as Employment Law - COTW #48

OK, if you read the headline and you're familiar with AT&T v. Concepcion (opinion here), you're probably wondering: Why is a consumer contracts case from April the Case of the Week? Good question, two answers. First, it has important employment law implications; and second, I'm planning a Supreme Court employment law year in review and didn't have anything on this important case yet (and no, my review won't be in Haiku, Eric Meyer).

Concepcion arose from cellular telephone contracts that included arbitration clauses requiring arbitration of all disputes... but did not permit classwide arbitration. And there's the rub. Under California law (called the Discovery Bank rule), class waivers in consumer agreements were unconscionable in certain circumstances and therefore unenforceable. This rule conflicts with the Federal Arbitration Act, and as we see in Concepcion, it also conflicts with the Supreme Court's current love affair with arbitration generally.

There are times when arbitration agreements are unenforceable, including upon "such grounds as exist at law or in equity for the revocation of any contract." 9 U. S. C. §2. But here, the Supreme Court held that conditioning the enforceability of arbitration agreements on the availability of classwide arbitration procedures was not one of those times. Per Justice Scalia, writing for the five-Justice majority: "Arbitration is a matter of contract, and the FAA requires courts to honor parties’ expectations." And, the Discover Bank rule "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress" in the FAA. Therefore the state rule was preempted.

How does this tie-in to employment law? Well, replace cell phone contracts with employment contracts. Would the analysis be different? It's tough to say for certain, but I suspect employers will view this as a green light (or at least a flashing yellow) to tie employees in to arbitration agreements with class waivers. And it gives them a solid argument for enforcing those agreements.

Posted by Philip Miles, an attorney with McQuaide Blasko in State College, Pennsylvania in the firm's civil litigation and labor and employment law practice groups.