On May 21, 2018, the United States Supreme Court issued a decision holding that class action waivers in employment arbitration agreements were valid and enforceable in the face of a challenge under the National Labor Relations Act (“NLRA”), resolving a significant disagreement among lower federal courts. By way of background, the Federal Arbitration Act (“FAA”), passed in 1925, provides for enforcement of agreements between parties to resolve disputes through private arbitration, rather than in court. Under the FAA’s “savings clause,” arbitration agreements may generally only be voided under traditional contract principles (for example, in cases of duress or unconscionability).
Over the past several months, allegations of sexual misconduct have dominated headlines in all walks of celebrity life – including Hollywood, national newsrooms, business boardrooms, and even the halls of Congress. These revelations of widespread harassment have fueled the rise of the “#metoo” movement, which strives to raise the curtain on the pervasiveness of sexual harassment and assault in both the workplace and everyday life. Indeed, Time Magazine has collectively named “The Silence Breakers” as its 2017 Person of the Year. In many cases, and as is common in the American workplace, accusers of the alleged perpetrators now in the news had been required to sign agreements requiring arbitration of any employment-related disputes.
Since the Steelworkers Trilogy of 1960, the Supreme Court has furthered the private justice system by liberally interpreting the scope of arbitration agreements. The Third Circuit, in a case applying New Jersey law, however, may have recently narrowed the scope of those decisions within its jurisdiction. In Moon v. Breathless, Inc., the Circuit had to determine whether a statutory claim was covered by an arbitration agreement or could be brought in court. The individual bringing the claim had signed an independent contractor agreement which contained a standard arbitration clause covering all disputes arising under the agreement. Nevertheless, the individual wanted to bring in court a statutory (FLSA) claim based on their asserted employee status. The Circuit was called upon to determine whether, under the breadth of the arbitration clause, the statutory claim, which on its face was inconsistent with the independent contractor agreement, could be brought in court or must be resolved in arbitration.
Employers tend to like certain aspects of arbitration. Often it provides a faster and more economical resolution to a dispute than litigation. Parties can represent themselves, without the need for counsel, before an impartial decision maker chosen by them. Most arbitrators have some level of experience or expertise in the subject matter of the controversy they will be deciding. Courts and juries generally will have no such experience. Employers also believe that an arbitrator’s economic self interest, the desire to be selected for future cases, will prevent an arbitrator from entering a “runaway jury” size adverse award significantly beyond the actual, documented losses and, where appropriate, prevailing party attorney fees.
In an important win for employers seeking to resolve disputes with former employees outside of the circuit courts, the West Virginia Supreme Court of Appeals recently upheld a circuit court decision that compelled a former employee to submit his wrongful termination dispute to alternative dispute resolution (“ADR”) rather than pursue the claim in court. Although the West Virginia Supreme Court often finds ADR agreements to be unenforceable, it’s important to note why they found this one was acceptable.
As we have reported on this blog before, there has been a trend among employers to adopt mandatory arbitration agreements. For many employers, arbitration is preferred to civil litigation because the process is usually faster and, as a result, tends to be less expensive. In part, this increased use of mandatory arbitration agreements can be attributed to a series of recent decisions by the United States Supreme Court that have reaffirmed the validity of arbitration agreements. West Virginia courts have not always been receptive to arbitration agreements and have found them to be invalid in a variety of contexts, including the employment context. However, this month the Supreme Court of Appeals of West Virginia has issued two important decisions that found arbitration agreements to be valid. The Court’s decision in New v. GameStop, Inc. d/b/a GameStop, No. 12-1371, which upheld an arbitration agreement in the employment context, has important ramifications for all West Virginia employers that use or plan to use arbitration agreements.
West Virginia has joined a majority of states in concluding that an arbitration provision that is part of a larger contract does not require separate consideration if there is adequate consideration for the contract as a whole. The West Virginia Supreme Court of Appeals’ November 2012 opinion in Dan Ryan Builders, Inc. v. Nelson focused on an arbitration provision that required a home purchaser to submit all claims to arbitration, but allowed the home builder/seller to pursue litigation in some instances.
For a long time now, employers have engaged in the practice of entering into arbitration agreements with their employees to arbitrate disputes that may arise during the employment relationship, including wrongful discharge claims stemming from the end of an employment relationship. Although several state courts continue to be hostile towards arbitration agreements, the Supreme Court of the United States has issued a handful of significant decisions in the last few years reminding the states that the Federal Arbitration Act (“FAA”) “declares a national policy favoring arbitration” which will preempt state laws inconsistent with this policy.