SCOTUS: The regular rules apply to waiver of arbitration

Yesterday, a unanimous Supreme Court issued an opinion in Morgan v. Sundance, Inc. The plaintiff filed a Fair Labor Standards Act (FLSA), nationwide, collective action, wage and hour claim against her employer, a Taco Bell franchise, in federal court. But, wait! She signed an arbitration agreement as part of her the employment application process.

Justice Kagan authored
the opinion.

Ordinarily, under the Federal Arbitration Act (FAA), the employer could get the suit tossed from federal court and sent to arbitration. Here, the employer first litigated the case for a bit. It filed a motion to dismiss, answered the complaint (without raising arbitration as an affirmative defense), mediated, discussed settlement . . . and only then, after eight months of litigation, did the employer move to stay the litigation and compel arbitration. 

The Eighth Circuit analyzed whether the employer had waived its right to arbitration by looking at two factors:

• Did the party know of the right and act inconsistently with that right?; and
• Was the other party prejudiced by the inconsistent actions?

The first factor is just standard federal waiver analysis for issues other than arbitration. But the second factor was an extra proverbial thumb on the scale that the court only applied to waiver of arbitration. The Eighth Circuit justified this extra factor base on the FAA's "policy favoring arbitration."

Well, SCOTUS disagrees. "the FAA’s 'policy favoring arbitration' does not authorize federal courts to invent special, arbitration-preferring procedural rules." Courts must instead strip away the arbitration-only prejudice requirement and instead focus on the conduct of the party that has potentially waived its right to arbitration. In other words - apply the regular waiver rules, not arbitration-specific rules. 

Judge Barrett and the case of the arbitrating Grubhub driver

 Back with another employment law(ish) opinion from Judge Barrett: Wallace v. Grubhub Holdings, Inc. A group of Grubhub drivers filed claims against the company, including FLSA overtime claims. Grubhub sought to enforce arbitration agreements under the Federal Arbitration Act. 

The FAA, however, is not universal. It does not apply to three categories of workers: 1. "seamen;" 2. "railroad employees;" and, at issue here, 3. "any other class of workers engaged in foreign or interstate commerce." Judge Barrett held that the Grubhub drivers did not fall under that third exemption. 

Although the drivers delivered goods that had traveled across state lines, they themselves did not engage in interstate commerce. Per Judge Barrett:

To show that they fall within this exception, the plaintiffs had to demonstrate that the interstate movement of goods is a central part of the job description of the class of workers to which they belong.

Thus, the drivers were bound by the FAA and their arbitration agreements.  

Third Circuit on the Federal Arbitration Act and Uber drivers

Do you love the arcane scope language of the Federal Arbitration Act (FAA)? Do you also love the convoluted mess of employee-independent contractor classification analysis? Who doesn't!? The Third Circuit just issued a precedential opinion in Singh v. Uber Technologies, Inc.

The plaintiff brought this putative class action on behalf of himself and other similarly situated Uber drivers in New Jersey. He claimed that Uber misclassified them as independent contractors, and that Uber owes them money for overtime and business expenses that they would be entitled to if they had been properly classified as employees. Classification of Uber drivers (and "gig" workers generally) is a hot topic these days.

But wait . . . before we get to that hot topic . . . the plaintiff driver had an arbitration agreement. So, Uber moved to compel arbitration. But double wait . . . the FAA excludes transportation workers that are engaged in interstate commerce. So, can Uber compel arbitration or not?

Standard of Review

Not official use. 

The first interesting issue in this case is the standard of review on a motion to compel arbitration. The Supreme Court recently held in New Prime Inc. v. Oliveira that the Court decides whether the FAA exemption applies (also relevant to this case, SCOTUS held that the exemption applies to both employees and independent contractors). But what standard of review applies? The Court has some options, including the motion to dismiss
standard (a low bar) and the summary judgment standard (a relatively high bar). Orrr, how about a hybrid?

[T]he motion to dismiss standard applies if the complaint and incorporated documents provide a sufficient factual basis for deciding the issue. But where those documents do not, or the plaintiff responds to the motion with additional facts that place the issue in dispute, the parties should be entitled to discovery on the question of arbitrability before a court entertains further briefing with an application of the summary judgment standard to follow.

(internal citations and quotations omitted).

Does the FAA exemption apply to Uber drivers? 

Here, the Third Circuit identified two issues regarding the coverage of the FAA:

(1) if § 1 [the exemption] only applies to transportation workers who transport goods, or also those who transport passengers, and  

(2) whether Singh belongs to a class of workers that are engaged in interstate commerce.

Cutting to the chase - the Third Circuit held that the FAA exemption applies to transportation workers regardless of whether they are transporting goods or people. Therefore, it would apply to Uber drivers "engaged in interstate commerce."

The Court's analysis stops there. The Court remanded the case back to the district court to allow the parties to engage in discovery to explore the issue of whether the driver was engaged in interstate commerce. 

SCOTUS: No class action arbitration from ambiguous agreement

Sorry, I was out yesterday so I'm a day late to this party. On Wednesday, the Supreme Court released its opinion in Lamp Plus, Inc. v. Varela. A hacker stole employee data from Lamp Plus, which was used to file fraudulent tax returns. An employee, Varela, filed a putative class action in federal court.

One problem - the employee had an arbitration agreement. So, the court compelled arbitration. Here's the twist though - the court compelled class arbitration. The courts concluded that the arbitration agreements were ambiguous as to whether the parties consented to class arbitration. Under California law (comparable to most states' contract law I imagine), ambiguous contracts are interpreted against the drafter. So, the lower courts reasoned, Lamp Plus as the drafter could be compelled into class arbitration based on the ambiguous contracts.

The Supreme Court disagreed. "Courts may not infer from an ambiguous agreement that parties have consented to arbitrate on a classwide basis." Frankly, I'm not sure what this means procedurally. I think the district court will now reconsider the motion to compel arbitration on remand, and presumably conclude that the parties must arbitrate Varela's individual claim.

There are reasons an employer may or may not want to consent to class arbitration. This is just another topic that can be addressed in the language of the arbitration agreement itself though.

Supreme Court limits arbitration in interstate trucker case

Yesterday, the Supreme Court issued an opinion limiting the scope of the Federal Arbitration Act (FAA) in New Prime Inc. v. Oliveira. Yes, you read that right - limiting. The Supreme Court actually ruled against arbitration. Is this it? The end times? Apocalypse? Only time will tell . . . .

The FAA generally requires courts to compel arbitration where the parties agreed to arbitrate their dispute. There are, however, exceptions. One of which is "contracts of employment of . . . workers engaged in . . . interstate commerce." Important sidenote: the Supreme Court had previously limited this exception to only include transportation workers. Welp, New Prime involved a driver, working for an interstate trucking company.

The Court was faced with two questions. First, if the parties agreed to delegate the arbitrability question to an arbitrator, then who decides whether the arbitration agreement falls under the FAA exception (arbitrator or court)? Justice Gorsuch, for a unanimous court (except Kavanaugh who did not participate) held that the court and not the arbitrator decides that issue. Why? Because the delegation of the arbitrability question is itself an arbitration agreement - and therefore, the court must first resolve whether the FAA covers the agreement (or instead falls under an exception) before compelling arbitration.

Second question: the company and the driver had a contract designating him an "independent contractor." So, does the contract count as a "contract of employment"? Modern lawyers will probably have a gut reaction of "heck no - we have a very clear distinction between 'employee' and 'independent contractor' under the law!"

Not so fast! The FAA was adopted in 1925, and we're dealing with a (mostly?) originalist Supreme Court! So, the question is not "What does 'contract of employment' mean now" - but, rather, "What did 'contract of employment' mean in 1925?" The answer is that 'contract of employment' was understood as a very broad phrase. Per Justice Gorsuch's opinion, "dictionaries tended to treat 'employment' more or less as a synonym for 'work.'" Court opinions and statutory text at the time also support this broad interpretation. The Court concluded that "contract of employment" therefore includes independent contractors as well as employees.

So, contracts of employees and independent contracts with interstate transportation companies are  excluded from the FAA's compulsory arbitration provisions. And, the court (not the arbitrator) determines whether the exclusion applies.

SCOTUS on the "wholly groundless" exception to the arbitrability question

Yesterday, Justice Kavanaugh issued his first Supreme Court opinion in Henry Schein, Inc. v. Archer & White Sales, Inc. The opinion was a relatively mundane and unanimous arbitration ruling. Of course, arbitration (just about) always wins at the Supreme Court. Frankly, I can't think of a single exception, but I'm adding the "just about" parenthetical just in case.

Justice Kavanaugh

Under the Federal Arbitration Act (FAA), parties can contract to resolve certain disputes via arbitration instead of court litigation. Sometimes, when a dispute arises, they disagree on the threshold question of whether the arbitration agreement covers their specific dispute. The arbitration agreement may specify that the arbitrability question itself is something that must be decided by an arbitrator.

Yesterday, the Supreme Court held:

When the parties’ contract delegates the arbitrability question to an arbitrator, the courts must respect the parties’ decision as embodied in the contract.

Some courts had applied an exception to this general rule where the arbitrability claim was "wholly groundless." Yesterday, the Supreme Court rejected the "wholly groundless" exception - the arbitrability question goes to the arbitrator whether the court thinks the request to arbitrate is "wholly groundless" or not. 

Judge offers insight on (and criticism of) employment arbitration

If you're interested in employment arbitration agreements, then this is the opinion for you! In Styczynski v. MarketSource Inc., Judge McHugh (E.D. Pa.) provided a great overview of the law regarding unconscionability (both procedural and substantive) for employment arbitration agreements.

I found the analysis very interesting and helpful. What's getting all of the attention, however, is a concluding section in which Judge McHugh summarizes substantial criticism of employment arbitration agreements. Some of the main points:

• Roughly 20% of non-union employees have arbitration agreements (often imposed as contracts of adhesion);
• Employees win less often (compared to court litigation);
• Employees win less money when they do win;
• The forum deters many employees from even pursuing claims (with some data suggesting that arbitration is a greater deterrent than litigation).

His argument relied heavily on research following the Supreme Court's decision in 2001 in Circuit City (holding that the Federal Arbitration Act (FAA) covers employment contracts). Ultimately, of course, it's up to the Supreme Court to reverse the precedent holding that the FAA makes employment arbitration agreements enforceable (or for Congress to amend the FAA itself). 

Quoted in HR Dive on Arbitration (Plus Additional Commentary)

Important information from the Lawffice Space Department of Important Information: HR Dive quoted me extensively in Lisa Burden's article, Employers Shouldn't Rush to Adopt Arbitration Agreements in Light of 'Epic,' Experts Say. It's a good article with some nice insight from others as well.The article relates to the Supreme Court's recent ruling in Epic Systems (see, Supreme Court Okays Class Action Waivers in Arbitration Agreements). 

For those of you  who just can't get enough, here are my full comments:

On when employers should use arbitration

Not everyone likes arbitration. I happen to like it. Generally (though not always), arbitration will be faster and cheaper. Employers can also agree to confidentiality, and select a convenient geographic location. The big development in this case is that arbitration agreements can also mandate one-on-one arbitration, effectively precluding class or collective actions. Class actions, like state wage and hour laws for example, are generally “opt out” – meaning that employers can be on the hook for people who have never (and otherwise never would have) filed a claim. Even FLSA collective actions (which are “opt in”) may draw in employees who would not ordinarily file their own claims, but would opt in to a collective action. One-on-one arbitration agreements are a way to prevent any liability for those employees.

There are some downsides to arbitration. For example, there are very limited appeal options (great if you win, not-so-great if you lose). Also, employers may face serial claims that would be better handled in one consolidated class or collective case. Every time I say arbitration is faster and cheaper, somebody tells me I’m crazy – sometimes it is, sometimes it isn’t (I still think *on average* it’s faster and cheaper). You face the prospect of fractured rulings – you may win one case, but then lose the next one even though the facts (other than the identity of the employee) are exactly the same.

Others have pointed out that employers may face backlash from forcing employees into secret one-on-one arbitrations. For example, the #MeToo movement has been very critical of serial harassers essentially evading detection because their cases were repeatedly resolved in confidential proceedings, or with confidential settlement agreements.

Employers have many options though. They can require one-on-one arbitration, or allow collective actions. They can use jury trial waivers to avoid jury trials, but still litigate in court. Ultimately, employers should consult with their attorneys regarding their options. In my humble opinion, employers will generally be better off with arbitration agreements – especially if they can avoid class or collective actions.

On whether the Epic Systems ruling extends beyond the NLRA

Yes. The parties challenging the arbitration agreements focused on the NLRA (in Epic Systems). Their theory of the case was that the NLRA protects employees’ rights to engage in “concerted activities,” which they argued includes the right to bring class and collective actions – including class and collective actions under other statutes. In fact, Epic Systems itself was originally filed as an FLSA claim for unpaid overtime. Epic Systems sought to compel arbitration, but the District Court held that the waiver of class and collective actions in the arbitration agreements was unenforceable because it violated the NLRA right of employees to engage in concerted activities. In fact, Epic Systems is actually three cases consolidated by the Supreme Court. All three cases arose from FLSA wage and hour (overtime) collective actions (although NLRB v. Murphy Oil was separately filed as an unfair labor practice charge with the NLRB). Also, at least one of the cases (Ernst & Young LLP v. Morris) included a class action claim for overtime under California state law.

So, yes, this ruling is broad and will impact other labor and employment law cases outside of the NLRA. The heart of the holding is that employers and employees can enter into arbitration agreements that require individual (i.e. one-on-one) arbitration to resolve employment disputes. If an employee who signed such an agreement files a class or collective action claim in court, the employer can compel one-on-one arbitration instead. This result is driven by the FAA (Federal Arbitration Act), and is not specific to any one labor and employment law.

On whether Congress will do anything about it

This decision came with a fair amount of controversy. However, most of the criticism came from the “left” side of the political spectrum; and the four dissenting Supreme Court Justices were the traditional “liberal bloc.” In her dissent, Justice Ginsburg expressly calls for “Congressional correction.” However, realistically, the ideological opponents of this decision are simply not in power. Democrats hold only a minority of the House and Senate; and, of course, President Trump is a Republican. In this case, the Office of the Solicitor General actually switched positions after the changeover from President Obama to President Trump, and ultimately supported the employer side. Presumably, that is an indication of President Trump’s view of the case. In short, I doubt we’ll see legislative action any time soon.

New Whitepaper: Supreme Court Okays Class Action Waivers in Arbitration Agreements

Yesterday, the Supreme Court issued an important decision regarding arbitration agreements (specifically, agreements requiring one-on-one arbitration as opposed to class or collective actions). Read all about it in my new whitepaper: Supreme Court Okays Class Action Waivers in Arbitration Agreements.

SCOTUS to take on yet another arbitration case

The Federal Arbitration Act (FAA) generally allows parties to enter into binding contracts to arbitrate disputes that may arise later. However, under Section 1, the FAA does not apply “to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 9 U.S.C. § 1.

Last week, SCOTUS granted certiorari (agreed to hear) New Prime Inc. v. Oliveira. The case presents two interesting FAA issues:

1. If the parties agree to arbitrate any disputes (including the arbitrability of the dispute), then who decides whether the exemptions in Section 1 apply? A court? Or an arbitrator?

2. Does Section 1's exemption for certain "contracts of employment" apply to independent contractors?

We should get answers next term. The case involves an independent contractor truck driver and could have important implications for arbitration agreements in the transportation industry.

Lawffice Links - FAA v. NLRA

The Supreme Court is back! On Monday they heard oral arguments in Epic Systems Corp. v. Lewis, or as I call it, FAA v. NLRA. The issue is:

Whether an agreement that requires an employer and an employee to resolve employment-related disputes through individual arbitration, and waive class and collective proceedings, is enforceable under the Federal Arbitration Act, notwithstanding the provisions of the National Labor Relations Act.

Here are some fresh-baked Lawffice Links on the topic:

• Oral argument transcript.
• Audio available here starting on Friday. 
• Analysis on Law.com: On SCOTUS Opening Day, 'Yellow-Dog Contracts,' Getting a Word In and More.
• SCOTUSblog argument analysis:  An epic day for employers in arbitration case?
• As always, check out the whole SCOTUSblog case page for more. 

My prediction: Closely divided court, with a slight edge for the FAA. 

SCOTUS on Employee Class Action Waivers in Arbitration Agreements

On Friday, the Supreme Court granted certiorari in a ton of cases (16 for people who prefer precision). The exciting news on the employment law front is that the Court will hear three (now consolidated) cases addressing the issue of class action waivers in the employment context.

As the Petition in NLRB v. Murphy Oil USA puts it, the issue is:

Whether arbitration agreements with individual employees that bar them from pursuing work-related claims on a collective or class basis in any forum are prohibited as an unfair labor practice under 29 U.S.C. 158(a)(1), because they limit the employees’ right under the National Labor Relations Act to engage in “concerted activities” in pursuit of their “mutual aid or protection,” 29 U.S.C. 157, and are therefore unenforceable under the saving clause of the Federal Arbitration Act, 9 U.S.C. 2.

In other words, can employers enforce agreements that will force employees into individual arbitration and forego collective or class actions?

The Supreme Court has been very arbitration-friendly over the years, but often in closely divided cases. Justice Scalia was one of the voices in the narrow majority. This one could come down to President Trump's appointment (assuming (s)he gets confirmed in time to hear the case).

Exotic dancers, wage and hour claims, and arbitration clauses

Finally, a case that combines strippers, arbitration clauses, and wage and hour claims, amirite? The Third Circuit issued a brief non-precedential decision in Herzfeld v. 1416 Chancellor, Inc. (d/b/a The Gold Club).

An exotic dancer signed a series of "leases" with the Gold Club to "rent" its stage to perform in exchange for tips. The final agreement included an arbitration clause, requiring the parties to arbitrate "any dispute aris[ing] out of this agreement." Do the leases require the dancer to arbitrate her wage and hour claims under the FLSA (PA MWA and WPCL)?

Not the actual club at issue.
Photo by Rhinoedit at English Wikipedia, CC BY-SA 3.0. 

First, do the agreements even cover wage and hour claims? The Court noted that the agreements expressly negated any employment relationship and were styled as landlord/tenant leases.

Of course, an individual does not forfeit her rights as an employee under the FLSA simply by signing a cleverly drawn up contract, but this language does support the conclusion that Herzfeld's wage-and-hour claims exist outside the confines of the Stage Rental/Licensce Agreement, and, consequently, are not subject to its arbitration clause.

The Court declined to address the far more interesting (but "thorny") issues "concerning the enforceability of implicit collective-action waivers."

In short, in an effort to limit its liabilities under labor-employment laws by designating its contracts with the exotic dancers as landlord/tenant leases, the Gold Club has likewise limited the scope of its arbitration clauses. The FLSA and its state counterparts cannot be so easily circumvented. The rights embodied in the FLSA—"minimum wages and maximum work hours"—are absolute and unwaivable.

So, the Court won't address the issue... but its strong language in that closing certainly sounds like the judges are skeptical of wage and hour collective action arbitration clauses.

Lawffice Links - Court enjoins contractor blacklisting rules

Yesterday, the final rule implementing President Obama's "Fair Pay and Safe Workplaces" executive order, including the so-called "blacklisting" rules for federal contractors, was supposed to take effect (generally, it requires contractors to publicly disclose certain labor law violations and instructs federal agencies how to factor in those violations in awarding contracts). But, wait! At the last minute, a federal court enjoined most of the rule. I baked some Lawffice Links to bring you up to speed:

• Of course, you'll want the final rule and the Department of Labor's final guidance. 
• Or at least the brief overview on DOL's website.
• And then, you'll want to read the Judge's Memorandum and Order Granting Preliminary Injunction from the Eastern District of Texas. 
• Or at least some quality blogging about the decision, like maybe Eric Meyer's A Texas judge has enjoined practically all of the DOL “blacklisting” rules;
• Or maybe Seth Borden's Federal District Court Enjoins Reporting and Arbitration Requirements in Administration’s Contractor Blacklisting Rules; Allows Paycheck Transparency Provisions to Stand. 

Now, remember kids, it's only a preliminary injunction at a district court . . . so, the game is far from over. 

SCOTUS Love Affair with Arbitration Continues

I predict that in about 2020, we'll see a headline like this: "SCOTUS holds that man who tripped, fell, and landed on a stack of papers with arbitration agreements printed on them entered into binding arbitration agreement under the FAA." I'm only about half-kidding.

Justice Breyer 

In any event, yesterday, the Supreme Court issued another arbitration-friendly decision in DIRECTV v. Imburgia. It's a slightly convoluted setup, but I'll try to convey the gist (at the risk of oversimplifying):

• DirecTV entered into binding arbitration agreements with its customers, with a class-arbitration waiver. 
• The contract stated that the arbitration clause was unenforceable if the “law of your state” made class-arbitration waivers unenforceable.
• Surprise! Under California law, at the time the parties entered into the contract, class action waivers were unenforceable. 
• But wait! In one of the Supreme Court's many, many (many) other pro-arbitration rulings,  AT&T Mobility LLC v. Concepcion, the Court held that the California law was preempted by the Federal Arbitration Act (FAA).  

So, the Court, to the surprise of no one, concluded that the now-invalid California law did not render the arbitration clause and class-arbitration waiver unenforceable.

Despite my sarcasm, I actually think this case was a fairly easy one. Notably, one of the Justices who is not a rubber stamp for arbitration (Justice Breyer) authored the opinion. 

Why did a judge vacate Tom Brady's suspension?

I'm assuming you already heard about it - today, a federal judge vacated Tom Brady's 4-game suspension for "Deflate Gate." You can read the actual order here.

Generally, arbitration decisions are final and courts afford them extraordinary deference. So, why did the NFL lose? The Court focused on three factors:

1. Tom Brady didn't have adequate notice 


From the Court: 

The Court finds that Brady had no notice that he could receive a four-game suspension for general awareness of ball deflation by others or participation in any scheme to deflate footballs, and non-cooperation with the ensuing Investigation.

I don't think anybody would argue against a general right to know the rules ahead of time in disciplinary cases. It's a little tough to swallow that players weren't aware that cheating and then not cooperating with the resulting investigation could result in suspension. But, that's how the Court ruled.


2. Brady was denied an opportunity to examine co-lead investigator Jeff Pash


The NFL claimed that Pash played "no substantive role" in the investigation and made unspecified but not impactful comments about a draft of the investigatory report. The Court relied on NFL precedent for the proposition that players have a right to question their investigators, and the denial in this case was unfair and prejudicial.


3. Brady was denied access to investigatory materials, including witness interview notes


The Court ruled that Brady should have had an "opportunity to examine and challenge materials that may have led to his suspension." 

So, there you have it. It's hardly the full-throated declaration of innocence that some people are making it sound like. Was it the right decision? Certainly the Court focused on some legitimate concerns. That said, I'm skeptical that "Tom Brady the janitor" could get a court to apply this much scrutiny to an arbitration award.

I'm still baffled that the union would allow a CBA provision that gives the NFL Commissioner the power to serve as arbitrator whenever he wants - but that's a matter for the NFLPA to bargain.

Unconscionable Employment Arbitration Agreements

Well, we only have two weeks left in the semester in my employment law class at Penn State. Frankly, I'm disappointed in myself for not blogging more about the interesting cases and issues we're covering in class. I'm covering arbitration today, including a fairly recent Third Circuit opinion on the enforcement of employment arbitration agreements.

2-Step Analysis

In Nino v. The Jewelry Exchange, 609 F.3d 191 (3d Cir. 2010), the Court held that an employment arbitration agreement was unconscionable and therefore unenforceable. Analyzing unconscionability requires a two-step analysis:

1. The procedural component; and
2. The substantive component.

The Procedural  Component

"We have consistently found that adhesion contracts-that is, contracts prepared by the party with greater bargaining power and presented to the other party 'for signature on a take-it-or-leave-it basis'-satisfy the procedural element of the unconscionability analysis." This is a pretty low hurdle, and likely covers many employment arbitration agreements. Unless the employee is a professional negotiating a full contract, I suspect most employment arbitration agreements meet this standard.

The Substantive Component

"[A] party challenging a contract on unconscionability grounds must also show that the contract is substantively unconscionable by demonstrating that the contract contains 'terms unreasonably favorable to the stronger party.'"

The Court found several of the clauses in the arbitration agreement at issue in Nino objectionable:

• The agreement required employees to file grievances within 5 days - the Court noted that even 30 days was too short (meanwhile the employer had no notice requirements for any of its claims). 
• Another clause required the parties to bear their own attorney's fees, costs and expenses. This clause conflicted with Title VII's fee-shifting structure, and burdened the employee's ability to seek legal representation in a discrimination dispute.
• The agreement also had a lopsided system for selecting the arbitrator. The parties would request a panel of 4 arbitrators from the AAA, and then take turns striking one until one was left - starting with the employer. The obvious effect being that the employer strikes two and the employee only strikes one.

Severability

Finally, the Court analyzed whether the substantively unconscionable provisions could be severed from the agreement such that the Court could compel arbitration minus the bad parts. The analysis involves two "separate and independent" bases for declining to enforce the agreement as a whole:

The first of these is whether the unconscionable aspects “of the employment arbitration agreement constitute [ ] ‘an essential part of the agreed exchange’ of promises” between the parties. If the unconscionable aspects of the clause do not comprise an essential aspect of the arbitration agreement as a whole, then the unconscionable provisions may be severed and the remainder of the arbitration agreement enforced . . . . 

The second consideration for the question of severability . . . is whether the unconscionability of the arbitration clause demonstrates “a systematic effort to impose arbitration on an employee, not simply as an alternative to litigation, but as an inferior forum that works to the employer's advantage.”

(internal citations omitted). The Court concluded that the agreement was so "pervasively one-sided" that it could not sever the unconscionable provisions, and therefore the entire agreement was effectively unenforceable.

3d Cir.: Availability of Classwide Arbitration is for the Court

I'm not gonna lie - posts about the technical procedure for interpreting arbitration agreements are not exactly my most popular. But these issues are important, and often employment-law-related.

The Third Circuit recently issued a precedential decision in this area in Opalinski v. Robert Half International, Inc. (opinion here).Thank you to Judge Ambro for the concise intro, including the issue and holding (it makes my life as a blogger so much easier):

We consider whether a district court, rather than an arbitrator, should decide if an agreement to arbitrate disputes between the parties to that agreement also authorizes classwide arbitration. Because of the fundamental differences between classwide and individual arbitration, and the consequences of proceeding with one rather than the other, we hold that the availability of classwide arbitration is a substantive “question of arbitrability” to be decided by a court absent clear agreement otherwise.

This was a FLSA case, so employers take note. Also, if your arbitration agreements are - in the words of the Court - "absent clear agreement" regarding classwide arbitration, then you may wish to rectify the situation.

NFL Cheerleaders Face Arbitration Motion

Last week, I blogged about the Buffalo Bills' cheerleaders filing a wage and hour claim, noting that the Oakland Raiderettes had filed a similar lawsuit earlier in the year. Now, the Raiderette lawsuit faces a significant hurdle: arbitration.

The Oakland Raiders recently filed a Motion to Compel Arbitration (available here). The Raiders claim that the cheerleaders signed an employment agreement that requires arbitrating "all disputes" through the NFL. To make matters even worse for the cheerleaders, the Raiders claim the Federal Arbitration Act (FAA) requires the cheerleaders to arbitrate their disputes individually.

Unfortunately, for employment law bloggers, arbitration could take some of these disputes out of the public eye. We'll have to wait and see whether the Courts actually compel arbitration under the circumstances.

3d Cir.: FLSA Claims May Proceed Without CBA Grievance Arbitration

My home circuit, the Third Circuit, issued an FLSA opinion this week in Bell v. SEPTA (opinion here). Bus drivers and other vehicle operators claimed that they were not paid for pre-trip activities such as reading bulletins, checking detours, and performing vehicle inspections (and, as they worked 40 hours per week on top of these activities, all of that time was unpaid overtime). The district court dismissed the FLSA claims, holding that the claims were subject to collective bargaining agreement (CBA) grievance procedures.

On appeal, the Third Circuit noted that the FLSA claims existed independently of the CBA. The workers did not seek interpretation of the CBA, but merely payment for time spent working as required by the FLSA. The Third Circuit contrasted this with prior precedent holding:

[I]f a FLSA claim depends on the disputed interpretation of a CBA provision, an employee must first go to arbitration—through the representative union—before vindicating his or her rights in federal court under the FLSA.

The Court vacated the dismissal of the FLSA claims and sent them back to the district court where they can proceed without exhausting the CBA's grievance arbitration procedure.

Image: Third Circuit logo used in commentary on Third Circuit. Not official use.