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Supreme Court Arbitration Jurisprudence—No Class Action If You Say So

Combining last week’s decision in American Express Co. v. Italian Colors Restaurant with its decision earlier this month in Oxford Health Plans v. Sutter, the Supreme Court’s position now seems clear. If an employer wants to avoid class or collective actions, it can do so by having an arbitration agreement that precludes arbitration of claims on a class basis. But to be sure that happens, employers need to be explicit about it.

There is no doubt that there is more nuance than that, that there will be new arguments explaining why such bans will not work, and that some courts will go for them, but the Supreme Court position seems quite definitive.

The most logical way for this new framework to be changed is legislative, and of course there has been legislation introduced in the past several Congresses that would prevent employers from requiring an arbitration agreement as a condition of employment. But at least for the foreseeable legislative future, that seems unlikely.

The net result of these decisions is a rather clunky way to solve a huge problem that is plaguing the employer community, namely collective actions brought under the Fair Labor Standards Act (and state equivalents). Courts have been unwilling or unable to address that issue by establishing an appropriate standard for conditional certification. And now, because arbitration appears to be a solution to wage and hour collective actions, many employers that have not implemented arbitration plans will be rethinking their decision.

It is unlikely that anyone can predict all the ramifications of these new cases with certainty. But that there will be a changed world now seems inevitable.

As a side note, whatever you may think of the judicial view of Justice Kagan, who went from writing the Court majority in Sutter to dissenting in American Express, you have to appreciate her clear cut writing:

And here is the nutshell version of today’s opinion, admirably flaunted rather than camouflaged: Too darn bad.

Michael W. Fox is a shareholder in the Austin office of Ogletree Deakins.

June 24, 2013 | TAGS: , , , , .