Litigating Arbitration Agreements: Recent United States Supreme Court Decisions Provide Guidance to Employers Looking to Avoid Court
Despite entering into arbitration agreements with their employees, employers all too often find themselves in court adverse to the very employees who have signed an arbitration agreement. The U.S. Supreme Court recently issued three arbitration decisions that have important implications for employers seeking to avoid the inside of a courtroom. First, in Stolt-Nielsen S.A. v. AnimalFeeds International Corp., the Court issued an employer-friendly decision that prohibits class action arbitration, unless the parties specifically provide for and consent to class action proceedings in their arbitration agreement. This decision could potentially halt employees, who are subject to an arbitration agreement, from bringing or joining class actions in court.
The other two cases, Rent-A-Center West v. Jackson and Granite Rock Co. v. International Brotherhood of Teamsters, addressed whether it is the court or an arbitrator’s role to decide enforceability challenges to an arbitration agreement. Rent-A-Center held that arbitrators are the proper decision-makers of unconscionability challenges, unless the party asserting unconscionability specifically challenges the “delegation provision” granting the arbitrator authority to hear the case. By contrast, in Granite Rock Co., the Supreme Court concluded that courts, rather than arbitrators, are the proper decision makers when a party challenges the formation of the contract containing the agreement to arbitrate.
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