The United States Supreme Court issued a decision in AT&T Mobility v. Conception, that the Federal Arbitration Act (“FAA”) prohibits states from conditioning the enforceability of arbitration agreements on the availability of class arbitration. Prior to this ruling, many courts had refused to enforce employment and consumer arbitration agreements which waived class actions. This week’s ruling by the Supreme Court follows a series of decisions supporting arbitration. As reported by Brent Kendell in the Wall Street Journal,
[t]ypically, the Supreme Court favors arbitration provisions, reading the Federal Arbitration Act as a broad congressional mandate to promote a private dispute-resolution system that advocates say is more efficient than traditional litigation.
What does this mean for employers in the U.S.? Requiring employees sign arbitration agreements that include waivers of class actions could greatly reduce the litigation risk of large, costly employment litigation. In the past few years, class action attorneys have continued to bring hundreds of wage and hour and ERISA class actions against employers in the U.S. This week’s decision by the United States Supreme Court gives employers a tool to fight back and prevent large scale class actions. However, it is important to note that some laws, e.g. Sarbanes-Oxley whistleblower provision, prohibit waiver of rights by arbitration and would not be affected by the Supreme Court’s decision. For more detailed information please see our Alert: Supreme Court Opens the Door to Enforcing Class Action Waivers and Bars in Arbitration Agreements.