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Supreme Court Says: Express Language Required to Arbitrate on a Class Basis

Executive Summary: Approximately one year ago, in Epic Systems Corp., the United States Supreme Court upheld the enforceability of mandatory arbitration agreements that prohibit employees from bringing employment claims on a class or collective basis – settling a longstanding circuit split over whether such provisions violate federal labor law. Just this week, the Supreme Court issued another important ruling in Lamps Plus, Inc., which clarifies that an employer cannot be compelled to arbitrate class and collective claims, unless the express language of its arbitration agreement authorizes such action. This decision marks the continued approval of arbitration agreements that require employees to individually arbitrate claims against their employers.

Supreme Court Confirms Class Arbitration May Not Proceed Unless Expressly Permitted by the Arbitration Agreement

On April 24, 2019, in a 5-4 opinion written by Chief Justice Roberts, the U.S. Supreme Court held that even if an arbitration agreement is ambiguous as to whether classwide arbitration is permitted, that is insufficient to find that the parties consented to class arbitration. Lamps Plus, Inc. v. Varela, No. 17–988 (2019). In doing so, the Court emphasized that there is a fundamental difference between class arbitration and the individualized form of arbitration envisioned by the Federal Arbitration Act (FAA). The Court’s decision firmly reinforces decades of precedent that arbitration is a matter of consent and aligns with its recent trend of pro-arbitration opinions.

eLABORate: Lamps Plus Decision Sheds Light on Class Arbitration Agreements

On April 24, 2019, the United States Supreme Court in Lamps Plus v. Varela held that employees cannot bring class-wide claims in arbitration if the underlying arbitration agreement does not clearly and explicitly authorize class proceedings.

U.S. Supreme Court: Employment Class Arbitration Must Be Expressly Addressed in Contract

Class action arbitration is such a departure from ordinary, bilateral arbitration of individual disputes that courts may compel class action arbitration only where the parties expressly declare their intention to be bound by such actions in their arbitration agreement, the U.S. Supreme Court has ruled in a 5-4 decision. Lamps Plus, Inc. v. Varela, No. 17-988 (Apr. 24, 2019). The Supreme Court said, “Courts may not infer from an ambiguous agreement that parties have consented to arbitrate on a classwide basis.”

Supreme Court Dims The Light On Class Arbitration

By a 5-to-4 vote, the Supreme Court ruled today that the Federal Arbitration Act does not allow a court to compel class arbitration when the agreement does not clearly provide for it. As a result, employers whose valid arbitration agreements do not contain an explicit class action waiver (assuming they do not expressly consent to class arbitration) can rest easy knowing that the agreements allow them to compel alleged class claims to individual arbitration (Lamps Plus Inc. v. Varela).

Supreme Court Doubles Down on Enforceability of Class Arbitration Waivers

The United States Supreme Court today ruled that arbitration agreements must explicitly provide for class arbitration for that process to be invoked, bolstering the Court’s 2018 decision in Epic Systems Corp. v. Lewis which held that class action waivers in arbitration agreements signed by employees are enforceable and do not violate the National Labor Relations Act. In today’s Lamp’s Plus Inc. et al. v. Frank Varela decision, the Court held that an arbitration agreement that was ambiguous as to whether class arbitration was available “does not provide a sufficient basis to conclude that parties to an arbitration agreement agreed to ‘sacrifice the principal advantage of arbitration.’” In doing so, the Court overturned an appellate court that, using general principles of contractual interpretation, found that the ambiguity in the agreement as to the availability of class arbitration should be construed against the employer who had drafted the agreement.

DOL Issues Opinion Letters About Compensation for Volunteer Work and Expansion of FMLA Leave Entitlements

On March 14, 2019, the Wage and Hour Division of the Department of Labor (“DOL”) issued two opinion letters of interest to many employers—one concerning compensation for non-exempt employees who perform community service work and another concerning certain employers’ efforts to expand leave entitlements under the Family and Medical Leave Act (“FMLA”).

Fifth Circuit Rules No Notice of Collective Actions for Employees With Arbitration Agreements

The U.S. Court of Appeals for the Fifth Circuit Court recently issued an opinion with major implications in In re: JPMorgan Chase & Company that impacts collective actions under the Fair Labor Standards Act (FLSA). On February 21, 2019, the Fifth Circuit became the first court of appeals to rule on whether a court may send notice of a collective action to employees with valid arbitration agreements. The court held that the answer is no: “district courts may not send notice to an employee with a valid arbitration agreement unless the record shows that nothing in the agreement would prohibit that employee from participating in the collective action.”

Supreme Court Rules 14-Day Time Limit to Appeal Class Decertification Is “Purposefully Unforgiving”

On February 26, 2019, the Supreme Court of the United States ruled that under Rule 23(f) of the Federal Rules of Civil Procedure (FRCP), a petition for permission to appeal an order decertifying a class must be filed within 14 days from the date the district court issued its order.

Class Action Trends Report Winter 2019

Our quarterly report discusses new developments in class action litigation and offers strategic guidance and tactical tips on how to defend such claims.