Court of Appeal: No Post-Lawsuit Change to Arbitration Policy

The court of appeal's decision in  Avery v. Integrated Healthcare Holdings Inc. contains a number of lessons about administering policies and litigating.   So, yes, it's another arbitration decision, but more interesting.

First, Tenet owned some hospitals that it later sold to Integrated. Tenet had in place a “Fair Treatment Process,” which included arbitration.  Applicants and employees signed off on this process at a number of different points in their employment relationship. Integrated maintained the arbitration program after the purchase, but made some changes and called it the Alternative Dispute Resolution Process. 

Avery brought a class action for unfair competition, failure to pay appropriate overtime wages, failure to provide meal and rest periods, failure to pay wages when due, and failure to provide accurate wage statements. 

While the lawsuit was pending, Integrated unilaterally changed the arbitration clause by adding a class arbitration waiver.  Integrated posted the change on its intranet page.  But it did not provide employees with a copy of the new employee handbook containing the arbitration provision change, instruct employees to review the new handbook on the intranet, or even notify employees of the existence of the new handbook.

Integrated tried to compel arbitration of each individual plaintiff's claim. The trial court denied its motion to compel. The Court of Appeal affirmed.

The court made two important decisions.  First, the court held that Integrated's class action waiver was unenforceable, but not because of the ongoing war about class action waivers.  Rather, the court held that it was invalid because it was issued after the claims arose, and Integrated failed to notify employees about the new employee handbook. As a result, Integrated was required to rely on the arbitration clause in the Tenet Employee Handbook, the Fair Treatment Process.

 

an employer may not make unilateral changes to an arbitration agreement that apply retroactively to “accrued or known” claims because doing so would unreasonably interfere with the employee’s expectations regarding how the agreement applied to those claims.  (Peleg v. Neiman Marcus Group, Inc. (2012) 204 Cal.App.4th 1425, 1465 (Peleg).)  Similarly, the employer must give the employee reasonable notice regarding changes the employer makes so the employee is aware of his or her rights under the agreement.  (Serpa v. California Surety Investigations, Inc. (2013) 215 Cal.App.4th 695, 706-708 (Serpa).)  Both of these rules prevent Integrated from applying the Alternative Dispute Resolution Process to Plaintiffs’ claims.

Of note, although there are cases disfavoring "policy" based arbitration provisions, the court emphasized that it is ok to have an arbitration agreement in a policy, and even to make changes. But those changes have to be prospective in application only, and the employer must ensure the employees receive reasonable and actual notice of the changes.

Second, the court decided that the trial court correctly denied the motion to compel arbitration, even under the Tenet policy.  Why?  Because the Integrated could not prove that employees had agreed to the Fair Treatment Process that it attached to its motion.  So, the employees signed off on the application and other forms stating they had received the Fair Treatment Process, but there was evidence that there was more than one of those in existence.  The court had no way of knowing if the Fair Treatment Process that was attached to the motion was the one employees agreed to.

Integrated contends the trial court erred in denying its motions to compel arbitration because Plaintiffs each agreed to arbitrate their claims under the Fair Treatment Process set forth in the Tenet Employee Handbook. According to Integrated, the Employee Acknowledgment Form, Application for Employment, and Transition Letter Plaintiffs signed incorporated the Fair Treatment Process and established its binding arbitration provisions as the exclusive means for resolving all claims regarding Plaintiffs’ employment. Although we agree Plaintiffs (except Cade) generally agreed to a Fair Treatment Process by signing one or more of these documents, we nonetheless affirm the trial court’s order denying the motions to compel arbitration because Integrated failed to present sufficient evidence establishing the specific Fair Treatment Process it presented to the trial court was the Fair Treatment Process to which Plaintiffs agreed.

The lesson here?  Ensure that there is a way of identifying handbooks and other documents (such as a control number, version, etc.).  In this case, the application and other documents "incorporated by reference" the full text of the Fair Treatment Process, but there was no way of knowing which version the employee agreed to.  It is critical to have a way of matching the receipt to the policy document.

This case is Avery v. Integrated Healthcare Holdings, Inc. and the opinion is here.

Supreme Court Upholds Express Class Action Waivers Regardless of Individual Claim's Value

Italian Colors restaurant challenged American Express's fees as violating anti-trust laws by filing a class action. But Colors signed an arbitration clause excluding class claims.   Colors argued that the cost of proving its case would be multiples of whatever it might recover.  Therefore, Colors contended, the class waiver impermissibly interfered with its ability to sue under federal law.  The Second Circuit court of appeals agreed with this premise, citing what is known as the "effective vindication" rule.  Under that rule, courts have held that arbitration agreements are invalid under the Federal Arbitration Act unless they permit "effective vindication" of federal statutory rights.

The Supreme Court, 5-3 with Justice Sotomayor recused, held that Colors is bound by its agreement to arbitrate, regardless of whether it is economically feasible to arbitrate its individual claim.  The majority's point is that Congress did not say in the anti-trust laws that a litigant must be able to bring a class action, or that litigation must be economically feasible.  Nothing in the arbitration agreement precluded or limited Colors' rights under the anti-trust law.  Further, anti-trust lawsuits and the Sherman Act predated the class action device.

The Court wrote:

Respondents argue that requiring them to litigate their claims individually—as they contracted to do—would contravene the policies of the antitrust laws. But the antitrust laws do not guarantee an affordable procedural path to the vindication of every claim.

The dissent (penned by Justice Kagan, with Ginsburg and Breyer concurring) essentially wrote that when the cost of bringing a claim under a federal statute significantly outweighs the potential recovery, then a class action right must be preserved as well.  The dissent stated that the majority opinion all but doomed Colors' case by rendering it prohibitively expensive to arbitrate.  Justice Kagan characterized the majority's response to that contention as, "Too darn bad."

This decision addresses class action waivers under federal law, not state law.  However, the majority does not appear to consider it a big difference whether the issue is if the FAA preempts state law or conflicts with federal law:

In dismissing AT&T Mobility [v. Concepcion] as a case involving pre-emption and not the effective-vindication exception, the dissent ignores what that case established—that the FAA’s command to enforce arbitration agreements trumps any interest in ensuring the prosecution of low value claims. The latter interest, we said, is “unrelated” to the FAA. 563 U. S., at ___ (slip op., at 17). Accordingly, the FAA does, contrary to the dissent’s assertion, see post, at 5, favor the absence of litigation when that is the consequence of a class-action waiver, since its “ ‘principal purpose’ ” is the enforcement of arbitration agreements according to their terms.

This last point undermines the California Supreme Court's focus on "low value" claims (like wage-hour matters) as a factor in determining if a class action waiver is valid.   We are waiting to see what the California high court plans to do with its decision in Gentry v. Superior Court, which the court is reconsidering.

This decision is American Express Co. v. Italian Colors Rest.  and the opinion is here.

U.S. Supreme Court: Arbitrator Had Power to Interpret Whether Arbitration Agreement Allowed Class Actions

The Supreme Court infrequently issues unanimous decisions in matters that concern employers and employees. So, it was a bit of a surprise to see Oxford Health Plans v. Sutter, the Court's 9-0 decision today.  Then I noticed that the substantive claims are not employment law-related.  Still, this opinion  will affect class action arbitration, employment law and otherwise.

Sutter was a doctor. He and a class of doctors sued Oxford for failing to reimburse adequately under the insurance reimbursement contract. Oxford required Sutter to arbitrated his claim under this arbitration clause:

No civil action concerning any dispute arising under this Agreement shall be instituted before any court, and all such disputes shall be submitted to final and binding arbitration in New Jersey, pursuant to the rules of the American Arbitration Association with one arbitrator.

Once in arbitration, the parties agreed to let the arbitrator  decide whether the above language authorized classwide arbitration. The arbitrator held that it did.  When the Supreme Court issued Stolt Nielsen v. AnimalFeeds (when arbitration agreement is silent regarding class action arbitration, the default is to hold individual arbitrations), Oxford asked the arbitrator again to exclude class claims. The arbitrator again refused.

So, for a second time Oxford moved to vacate that finding under the Federal Arbitration Act.  The trial court, the court of appeals and the Supreme Court unanimously said, no can do:

Here, the arbitrator did construe the contract (focusing, per usual, on its language), and did find an agreement to permit class arbitration. So to overturn his decision, we would have to rely on a finding that he misapprehended the parties’ intent. But [Federal Arbitration Act] §10(a)(4) bars that course: It permits courts to vacate an arbitral decision only when the arbitrator strayed from his delegated task of interpreting a contract, not when he performed that task poorly.

As in other cases, the Court's decision in part turned on the litigation strategy of one of the parties. Possibly to garner more votes, Justice Kagan was pretty negative about the arbitrator's decision.  She suggested that a court might well have ruled a different way if Oxford had chosen to ask the district court to interpret the agreement instead of the arbitrator:

We would face a different issue if Oxford had argued below that the availability of class arbitration is a so-called “question of arbitrability.” Those questions—which “include certain gateway matters, such as whether parties have a valid arbitration agreement at all or whether a concededly binding arbitration clause applies to a certain type of controversy”—are presumptively for courts to decide. Green Tree Financial Corp. v. Bazzle, 539 U. S. 444, 452 (2003) (plurality opinion). A court may therefore review an arbitrator’s determination of such a matter de novo absent “clear[] and unmistakabl[e]” evidence that the parties wanted an arbitrator to resolve the dispute. AT&T Technologies, Inc. v. Communications Workers, 475 U. S. 643, 649 (1986). StoltNielsen made clear that this Court has not yet decided whether the
availability of class arbitration is a question of arbitrability. See 559 U. S., at 680. But this case gives us no opportunity to do so because Oxford agreed that the arbitrator should determine whether its contract with Sutter authorized class procedures. See Brief for Petitioner 38, n. 9 (conceding this point). Indeed, Oxford submitted that issue to the arbitrator not once, but twice—and the second time after StoltNielsen flagged that it might be a question of arbitrability.

So, lesson learned.  If you think a court will follow Stolt-Nielsen more faithfully than an arbitrator, seek construction of your arbitration clause in court.

Bonus - the Court said this right up front:  "Class arbitration is a matter of consent: An arbitrator
may employ class procedures only if the parties have authorized them."  That does not bode well for those who would like the California Supreme Court to hold that class action waivers are illegal.

This case Oxford Health Plans LLC v. Sutter and the opinion is here.

Catching Up - Friday Pot Pourri

Here are a few of the cases I should have mentioned, but missed:

In Lui v. City and County of San Francisco (opinion here), a police officer suffered a serious heart attack. He had a number of physical ailments and sought a job that did not involve the physical requirements of a police officer.  Under  a new directive, San Francisco police officers, even those assigned to administrative duties, had to perform certain functions. Upholding the trial court, the court of appeal decided that the officer could not succeed on claims for disability discrimination, failure to accommodate, or failure to engage in the interactive process.  The officer could not perform several essential job functions. Although this case arises in the special context of police officers, the court's analysis of what is essential is important.

***

The Ninth Circuit held that Jennifer Westendorf did not make out a case of sexual harassment sufficient to get by summary judgment (!)  The comments and incidents she described, even though sexual in nature, and  though some were pretty darn risque I tell ya, were not severe or pervasive enough.  However, the court did allow the retaliation to go forward. The case is Westendorf v. West Coast Contractors (opinion here).

****

The Court of Appeal decided that Bingham McCutchen's arbitration agreement was unenforceable.  Interestingly, the arbitration agreement had a Massachusetts choice of law clause.  Unlike in most employment law-related cases, the court enforced the choice of law clause, over Bingham's objection. Why?   Glad you asked: Mass. law precluded agreements to arbitrate discrimination claims unless they were specifically addressed in detail in the arbitration agreement.  Too bad a non-compete was not involved. The court probably would not have recited how much California law loves choice of law clauses.  Anyway, the Court decided that the Massachusetts court rulings were not preempted by the Federal Arbitration Act and, therefore, the arbitration agreement was unenforceable. Be careful of choice of law clauses, they may well be enforced!  This case is Harris v. Bingham McCutchen et al. and the opinion is here.

California Supremes Expanding Employment Law Docket

The California Supreme Court is taking up several cases for review that will have significant effects on California employment law.  Once the Supreme Court grants review, the lower court opinion is not precedent and cannot be cited in briefs or relied upon unless the Court says otherwise.

Here are two recent "grants," courtesy of the California bar's employment law section email blast (and thank you, Phyllis Cheng as always):

In this case, the court of appeal expanded appellate review of arbitration decisions beyond what was previously the law.  One of the reasons parties turn to arbitration is finality - no appeals unless there are very specific circumstances.  This case carved a huge loophole.  This case also rejected the employer's argument that it had an "honest belief" that an employee was faking the need for medical leave, justifying discharge.

Richey v. Autonation, Inc. (2012) 149 Cal.Rptr.3d 280 (SC S207536/B234711review granted 2/13/13) CFRA/honest belief defense Petition for review after the Court of Appeal reversed the judgment in a civil action. This case presents the following issues: (1) Is an employer’s honest belief that an employee was violating company policy or abusing medical leave a complete defense to the employee’s claim that the employer violated the Moore-Brown-Roberti Family Rights Act (Gov. Code, §§ 12945.1, 12945.2)? (2) Was the decision below to vacate the arbitration award in the employer’s favor consistent with the limited judicial review of arbitration awards? Review granted/brief due.

This one is a "grant and hold" that likely will depend on the outcome of the pending Iskanian decision, which addresses overlapping issues.  The Court is going to decide whether class action waivers are lawful in California after the U.S. Supreme Court's decision in ATT Mobility v. Concepcion.

Franco v. Arakelian Enterprises, Inc. (2012) 149 Cal.Rptr.3d 530 (SC S207760/B232583 review granted 2/13/13) Class Action Waiver Petition for review after the Court of Appeal affirmed an order denying a petition to compel arbitration in a civil action. The court ordered briefing deferred pending decision in Iskanian v. CLS Transportation Los Angeles, LLC, S204032 (#12-97), which includes the following issue: Did AT&T Mobility LLC v. Concepcion (2011) 563 U.S. __ [131 S.Ct. 1740, 179 L.Ed.2d 742] impliedly overrule Gentry v. Superior Court (2007) 42 Cal.4th 443 with respect to contractual class action waivers in the context of non-waivable labor law rights?  Review granted/briefing deferred. The High Court of course has a number of other significant employment law cases pending. f you want to review all of the cases the California Supreme Court has on its docket (employment law and otherwise), the Court keeps a list here.

California Court Upholds Arbitration Agreement...(Pinch Me)

Let's start the new year off with a rare bird - a California court upholding an arbitration agreement in an employment case. 

Maribel Baltazar sued her former employer, Forever 21 and three employees, for sexual harassment, wage hour violations, and a variety of other claims.  The defendants moved to compel arbitration.

The court first decided that the California Arbitration Act, rather than the Federal Arbitration Act, applied. The defendants apparently took for granted that Forever 21 was "in interstate commerce" to secure FAA coverage.  The court of appeal ruled that proof is required.   The court also noted that the agreement was silent regarding the FAA's applicability.   So, if you want the pro-arbitration Federal Arbitration Act to apply, it is better to say so in the Agreement.  And counsel must affirmatively establish interstate commerce in the motion to compel.

Anyway, the court of appeal moved to the enforceability of the agreement. The plaintiff argued that the agreement was "unconscionable" under California law.  But the court of appeal disagreed.

The plaintiff first claimed the agreement was not "mutual," meaning that the employer did not have to arbitrate, but the plaintiff did.  The key issue was whether the agreement's permitting either party to go to court to obtain "provisional" relief (such as temporary restraining orders and preliminary injunctions) rendered the agreement one-sided.  The court noted that the California Arbitration Act itself permits parties to an arbitration agreement to seek provisional relief in court.  So, it is permissible for an arbitration agreement to authorized either party to seek provisional remedies (such as injunctions) in court.

The court also held that a provision protecting the employer's confidential information contained in the arbitration agreement did not render the agreement unconscionable. 

Finally, the court held that it was lawful for the agreement to provide for the AAA employment dispute rules, but also to provide that the California Arbitration Act would apply if the rules were held invalid.  The Court did not mention whether the AAA rules were attached to the arbitration agreement.  (Other opinions have held that failure to attach a copy of the rules render the agreement unconscionable.  Silly, IMO). Why silly? As the court of appeal pointed out in this case, many courts have already held that the AAA rules are fair. How can it be "unconscionable" to not attach a copy.

The case is Baltazar v. Forever 21, Inc. et al. and the opinion is here.   Oh - what does an enforceable arbitration agreement look like?   Behold!

AGREEMENT TO ARBITRATE

FOR CALIFORNIA STORES ONLY 

This Agreement to Arbitrate (hereinafter "Agreement‘) is entered into by and between Forever 21, Inc., and its subsidiary and affiliated companies, and each of their officers, directors, agents, benefit plans, insurers, successors, and assigns (hereinafter collectively "the Company‘) and [handwritten name of plaintiff], hereinafter "Employee" located at Warehouse . . . .

It is the desire of the parties to this Agreement that, whenever possible, "Disputes‘ relating to employment matters will be resolved in an expeditious manner. Each of the parties hereto is voluntarily entering into the Agreement in order to gain the benefits of a speedy, impartial dispute-resolution procedure. 

The Company and Employee mutually agree that any dispute or controversy arising out of or in any way related to any "Dispute,‘ as defined herein, shall be resolved exclusively by final and binding arbitration. Such arbitration shall be held in Los Angeles, California pursuant to the Model Rules for Arbitration of Employment Disputes of the American Arbitration Association then in effect. 

For purposes of this Agreement, the term "Disputes‘ means and includes any claim or action arising out of or in any way related to the hire, employment, remuneration, separation or termination of Employee. The potential Disputes which the parties agree to arbitrate, pursuant to this Agreement,
include but are not limited to: claims for wages or other compensation due; claims for breach of any employment contract or covenant (express or implied); claims for unlawful discrimination, retaliation or harassment (including, but not limited to, claims based on employment benefits (except where an Employee‘s benefit or pension plan contains a claims procedure which expressly provides for a final and binding arbitration procedure different from this one)), and Disputes arising out of or relating to the termination of the employment relationship between the parties, whether based on common law or statute, regulation, or ordinance.

Each of the parties voluntarily and irrevocably waives any and all rights to have any Dispute heard or resolved in any forum other than through arbitration as provided herein. This waiver specifically includes, but is not limited to, any right to trial by jury. 

This Agreement does not cover claims that Employee my have for worker‘s compensation benefits or unemployment compensation benefits. . . .

Pursuant to California Code of Civil Procedure 1281.8 either party hereto may apply to a California court for any provisional remedy, including a temporary restraining order or preliminary injunction. 

Both parties agree that the Company has valuable trade secrets and proprietary and confidential information. Both parties agree that in the course of any arbitration proceeding all necessary steps will be taken to protect from public disclosure such trade secrets and proprietary and confidential information. [¶] . . . [¶]

The provisions of this Agreement are severable, and if any one or more are determined to be void or otherwise unenforceable, the remaining provisions shall continue to be in full force and effect. If, in any action to enforce this Agreement, a Court of competent jurisdiction rules that the parties agreement to arbitrate under the Model Rules for Arbitration of Employment Disputes of the American Arbitration Association is not enforceable, then the parties agree that such Dispute shall be resolved by final and binding arbitration under the California Arbitration Act, California Code of Civil Procedure Section 1280, et seq.

The promises of the parties herein to arbitrate differences, rather than litigate them before courts or other bodies, provide consideration for each other.‖ (Capital letters, underscoring, and boldface in original.)

California Supreme Court Takes Up Arbitration Again

I posted in detail about Iskanian v. CLS Transportation here.  (This is one of the post-Concepcion cases that address arbitration. )  The California Supreme Court just granted review here.  The Court eventually will explain how Concepcion affects California arbitration law.  But that could take some time... Unfortunately for employers, the Court's grant of review means the Iskanian decision is uncitable going forward.
DGV

Court of Appeal: No Waiver of Arbitration and No Class Action Either

The Court of Appeal overturned a trial court's denial of the employer's motion to compel arbitration.  Here are some key points:

1.  The Court of Appeal expressly recognized that an arbitration agreement that is silent regarding class actions cannot be read to require classwide arbitration.

[A] party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so. . . . As the Arbitration Agreement explicitly covers the type of claims that are the subject of Reyes‘s lawsuit and provides only for bilateral arbitration, there is no contractual basis for concluding the parties agreed to submit to class arbitration. Therefore, we conclude that the Arbitration Agreement does not authorize class arbitration.

2. The court held that the employer did not waive the right to arbitrate, even though it did not cite the arbitration agreement in the answer, and though it conducted lots of discovery in court.  The reason is that the employer likely would not have prevailed on a motion to compel arbitration until the U.S. Supreme Court issued its decision in AT&T Mobility v. Concepcion  (2011) 563 U.S. ___ [131 S.Ct. 1740, 179 L.Ed.2d 742].  Therefore, the employer did not "waive" the right to arbitrate, when seeking arbitration would have been futile.

3.  Like pretty much every other court, the court here refused to follow the National Labor Relations Board's decision in DR Horton (holding that arbitration agreements cannot require class action waivers unless the employee can bring a class action in court). 

The decision is Reyes v. Liberman Broadcasting and the opinion is here.

DGV

Court of Appeal Upholds Arbitration Agreement

Nelsen v. Legacy Partners (opinion here) is the latest decision from the court of appeal to address the validity of arbitration agreements in California, after recent federal developments (Concepcion, DR Horton, etc.). 

The issues, as usual, are whether the arbitration agreement is "unconscionable," or violates public policy, and therefore is unenforceable as a contract.

The arbitration agreement was located at the end of a long handbook. Not surprisingly, the court first found that the agreement was "procedurally unconscionable,"  because

It was part of a preprinted form agreement drafted by LPI that all of LPI‘s California property managers were required to sign on a take-it-or-leave-it basis. The arbitration clause was located on the last two pages of a 43-page handbook. While the top of page 42 contains a highlighted prominent title ―TEAM MEMBER ACKNOWLEDGMENT AND AGREEMENT,‖ the title makes no reference to arbitration and the arbitration language itself appears in a small font not set off in any way to stand out from the rest of the agreement or handbook. Moreover, unless Nelsen happened to be conversant with the rules of pleading in the Code of Civil Procedure, the law and procedure applicable to appellate review, and the rules for the disqualification of superior court judges, the terms and rules of the arbitration referenced in the clause would have been beyond her comprehension.

So, now the courts say that failing to attach the Code of Civil Procedure makes an agreement procedurally unconscionable.  What happened to "everyone is bound to know the law?" or "ignorance is no excuse?"  Also, by saying that the agreement is not in a different font, the court is imposing a requirement that does not apply to other contracts.  That's not supposed to be allowed, demonstrating once again that the unconscionability doctrine is just an end run around Federal Arbitration Act preemption.

However, the court then turned to "substantive" unconscionability, which must also exist for an arbitration agreement to be invalidated.  In this case, though, the arbitration agreement was pretty much lifted verbatim from a California Supreme Court decision. (Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064.)  So, the Court did not find substantive unconscionability.

But Nelsen then argued that, regardless of unconcsionability, the arbitration agreement violated "public policy" under the California Supreme Court's decision in  Gentry v. Superior Court (2007) 42 Cal.4th 443.  In particular, Nelsen argued that the arbitration agreement barred her from bringing a class claim in arbitration because the agreement was silent as to class claims.

The court of appeal held that, indeed, the silent agreement did not encompass class-based claims.
However, the court then decided that Gentry did not invalidate the arbitration agreement because Nelsen did not adequately support the argument to the trial court.  That is, Gentry does not invalidate "all" class action waivers, so you have to establish the Gentry "factors," which Nelsen did not do.  In ruling this way, the court sidestepped whether Gentry remains good law.

Finally, the court decided that the National Labor Relations Board's decision in DR Horton was not binding and that the court would not follow it. The court noted that the decision was issued by just 2 Board members and that the issue of whether class action waivers are enforceable are beyond the Board's normal expertise.

So, another arbitration agreement survives. 

Court of Appeal: Concepcion Kills Gentry

It's hard to keep up with arbitration law in California.  Can you waive class actions? Must you attach the entire rule set to the arbitration agreement?  Must you serve a nutritious meal when you provide the arbitration agreement?  It never ends. 

The tension between California case law and case law interpreting the Federal Arbitration Act causes these problems. Last year the U.S. Supreme Court decided in ATT Mobility v. Concepcion that the Federal Arbitration Act allows parties to limit arbitration agreements to single-plaintiff claims.  The Court overruled the Califoria Supreme Court's decision in Discover Bank v. Superior Court.  We posted about that here.

Discover Bank was about a consumer class action for small dollars / cents per claim. In Gentry v. Superior Court (2007) 42 Cal.4th 443, the California Supreme Court extended Discover Bank  to wage-hour class actions. The Court held that a class waiver should not be enforced if "class arbitration would be a significantly more effective way of vindicating the rights of affected employees than individual arbitration."

The U.S. Supremes never mentioned Gentry. So what happened to it after Concepcion?

GENTRY

The Court of Appeal in Iskanian v. CLS Transportation- Los Angeles  (opinion here) decided that Gentry is no more. The real news here, though, is that this decision may dispose of - or severely restrict -- the entire body of anti-arbitration case law that has been developed over the past 10 years in California.  The language I've quoted below seems to sound the death knell to California courts' hostility to arbitration on "public policy" grounds (assuming this case remains on the books):

Now, we find that the Concepcion decision conclusively invalidates the Gentry test.  . . . Concepcion thoroughly rejected the concept that class arbitration procedures should be imposed on a party who never agreed to them. ... This unequivocal rejection of court-imposed class arbitration applies just as squarely to the Gentry test as it did to the Discover Bank rule. 

Second, Iskanian argues that the Gentry rule rested primarily on a public policy rationale, and not on Discover Bank‟s unconscionability rationale. While this point is basically correct, it does not mean that Gentry falls outside the reach of the Concepcion decision. ....

Third, the premise that Iskanian brought a class action to "vindicate statutory rights" is irrelevant in the wake of Concepcion. As the Concepcion court reiterated, "States cannot require a procedure that is inconsistent with the FAA, even if it is desirable for unrelated reasons." (131 S.Ct. at p. 1753.) ....

PAGA
 This Court then decided that Concepcion applies to PAGA claims too. The Court disagreed with
Brown v. Ralphs Grocery Co. (2011) 197 Cal.App.4th 489. "Brown held that the Concepcion holding does not apply to representative actions under the PAGA, and therefore a waiver of PAGA representative actions is unenforceable under California law."
This Court disagreed and held that Concepcion would not allow courts to invalidate arbitration agreements merely because they preclude PAGA claims:

Respectfully, we disagree with the majority‟s holding in Brown. We recognize that the PAGA serves to benefit the public and that private attorney general laws may be severely undercut by application of the FAA. But we believe that United States Supreme Court has spoken on the issue, and we are required to follow its binding authority.

HORTON

The Court then went for the Tri-Fecta and disagreed with the National Labor Relations Board's decision in DR Horton, too. D. R. Horton  (2012) 357 NLRB No. 184

In D.R. Horton, the NLRB held that a mandatory, employer-imposed agreement requiring all employment-related disputes to be resolved through individual arbitration (and disallowing class or collective claims) violated the National Labor Relations Act (NLRA) because it prohibited the exercise of substantive rights protected by section 7 of the NLRA.

 The Court decided that it was not bound to follow DR Horton:

We decline to follow D.R. Horton. In reiterating the general rule that arbitration agreements must be enforced according to their terms, Concepcion (which is binding authority) made no exception for employment-related disputes. Furthermore, the NLRB‟s attempt to read into the NLRA a prohibition of class waivers is contrary to another recent United States Supreme Court decision. In CompuCredit Corp. v. Greenwood (2012) __ U.S. __, __ [132 S.Ct. 665, 668] (CompuCredit), plaintiff consumers filed suit against a credit corporation and a bank, contending that they had violated the Credit Repair Organizations Act (CROA) (15 U.S.C. § 1679 et seq.).5 The plaintiffs brought the matter as a class action, despite having previously agreed to resolve all disputes by binding arbitration. The Supreme Court rejected their efforts to avoid arbitration, finding that unless the FAA‟s mandate has been "„overridden by a contrary congressional command,‟" agreements to arbitrate must be enforced according to their terms, even when federal statutory claims are at issue. (CompuCredit, at p. 669, citing (1987) 482 U.S. 220, 226.) The Supreme Court held: "Because the CROA is silent on whether claims under the Act can proceed in an arbitrable forum, the FAA requires the arbitration agreement to be enforced according to its terms." (CompuCredit, at p. 673.)

The D.R. Horton decision identified no "congressional command" in the NLRA prohibiting enforcement of an arbitration agreement pursuant to its terms. D.R. Horton’s holding—that employment-related class claims are "concerted activities for the purpose of collective bargaining or other mutual aid or protection" protected by section 7 of the NLRA, so that the FAA does not apply—elevates the NLRB‟s interpretation of the NLRA over section 2 of the FAA. This holding does not withstand scrutiny in light of Concepcion and CompuCredit.

ARMENDARIZ?

Well, all that is left is Armendariz.  This Court did not touch it expressly. So, stay tuned.... The California Supreme Court is considering related issues. My bet is that the Court will take this case up as well if the parties seek review.

DGV

Court of Appeal Won't Enforce Botched Arbitration Agreement

Few lawyers, and even fewer non-lawyers, pay attention to legal-sounding mumbo jumbo in releases and employment agreements.  Until they matter.

Employer American Management Services had a broad arbitration provision that applicant Brandon Grey signed (called an issue resolution agreement or "IRA").  But Grey's offer letter contained a narrower arbitration clause, which the employee duly signed as well. That offer letter said it was "integrated," meaning that its provisions superseded all prior agreements.  Yep, the integration clause killed the prior, broader, arbitration provision in the IRA.

The contract contains an integration clause. It provides, in part: ?This Agreement is the entire agreement between the parties in connection with Employee‟s employment with [AMS], and supersedes all prior and contemporaneous discussions and understandings.
 ***
 Construing the clause as a whole, we interpret it to mean the contract is the final expression of the parties‟ agreement with respect to Grey‟s employment and it supersedes the IRA. * * *

Well, Grey arbitrated his claims and lost.  Then he petitioned the court vacate the arbitration award, presumably on the ground that he had not agreed to arbitrate.  Grey had sued for discrimination, harassment based on sexual orientation, and other claims not based on a breach of his employment contract per se.  Grey claimed the language of the offer letter was narrow and he was not required to arbitrate such claims.  The court of appeal agreed:

The scope of the arbitration clause in the employment contract only applies to claims arising from a breach of that contract and does not encompass all claims an employee may have against AMS. All of Grey‟s claims are for statutory violations, and none arises from a breach of the employment contract. We agree with both parties that Grey is not required to arbitrate his claims under these terms. 

 So, Grey gets another bite at the apple, but in court this time. 

The case is Grey v. American Management Services and the opinion is here.

New U.S. Supreme Court Opinion May Signal End of California Courts' Arbitration Jurisprudence

In West Virginia, the state Supreme Court held that, as a matter of "public policy," pre-dispute arbitration agreements covering claims for personal injury arising from nursing home patronage are void.  In a terse, unsigned opinion, the U.S. Supreme Court reversed the state high court.

West Virginia's prohibition against predispute agreements to arbitrate personal-injury or wrongful-death claims against nursing homes is a cate- gorical rule prohibiting arbitration of a particular type of claim, and that rule is contrary to the terms and coverage of the FAA.

 

The West Virginia Supreme Court alternatively held that the arbitration agreement at issue was "unconscionable,"  a state law defense that is a valid exception to the Federal Arbitration Act. 
The U.S. Supreme Court also vacated that alternative holding:

in its discussion of the alternative holding, the state court found the arbitration clauses unconscionable in part because a predispute arbitration agreement that applies to claims of personal injury or wrongful death against nursing homes "clearly violates public policy." Id., at 91a.

On remand, the West Virginia court must consider whether, absent that general public policy, the arbitration clauses in Brown's case and Taylor's case are unenforce-able under state common law principles that are not specific to arbitration and pre-empted by the FAA

Here's why you may care - In California, the Supreme Court and the courts of appeal have fashioned special rules for enforcing arbitration of certain kinds of employment claims (arising from statute or public policy).  Rather than banning agreements to arbitrate outright (as in the West Virginia case), the California courts have come up with a gauntlet of impediments, making it easy to hold arbitration agreements "unconscionable" based on criteria that would not apply to any other kind of contract.  Thus, the California courts apply different rules to agreements to arbitrate certain kinds of claims, but not others. 

Given the Supreme Court's recent case law, these state law rules may not be long for this world. Of course, Congress could amend the Federal Arbitration Act or the Supreme Court's membership might change, in which case all bets are off.

This case is Marmet Healthcare Center v. Brown and the opinion is here.

California Supreme Court to Revisit Arbitration Ruling

The U.S. Supreme Court in November ordered the California Supreme Court to revisit its decision in Sonic-Calabasas A v. Moreno.  So, the California Supreme Court just issued the following order:

In light of the United States Supreme Court's order vacating our judgment in the above-entitled case and remanding the cause to this court "for further consideration in light of AT&T Mobility LLC. v. Concepcion, 563 U.S. __ (2011) [131 S.Ct. 1740]," the parties are requested to brief the significance of that case. The parties are requested to file and serve simultaneous briefs by February 10, 2012, and may file and serve reply briefs by February 24, 2012.

We posted about Sonic-Calabasas here.


What's going on here, is that the California Supreme Court decided in Sonic-Calabasas A, 4-3, that an arbitration agreement requiring employees to arbitrate instead of going through the labor commissioner's informal hearing procedure was unlawful. The decision in my opinion cannot survive the Fedreal Arbitration Act, particularly after the U.S. Supreme Court's decision in AT&T v. Concepcion (discussed here).


So, there will be a round of briefing and then the Court will probably schedule oral argument in the future and issue a new opinion.

DGV

Court of Appeal Holds Arbitration Agreement Invalid

Yes, again.This time, the court refused to enforce an arbitration agreement that was included in an application form. (Don't do this).  The key issues for the court were (1) that the agreement was written in the first person so as to suggest it was one-way (2) that the agreement referenced the AAA arbitration rules, but did not attach them to the agreement (3) that there was no language explaining that "binding arbitration" means you give up the right to trial in court and (4) that the agreement was "take it or leave it."

The one-way language and the inclusion of the agreement to arbitrate in the application materials probably weakened this arbitration agreement such that it was easy to invalidate. But on the issue of "arbitration rules," the court does not mention that the AAA employment rules are modeled after the California Supreme Court's decision in Armendariz, that they provide more employee protection than the statutory arbitration acts, and that Armendariz itself does not require attaching the rules.  Indeed, Armendariz allows for implying the statutory rules if an arbitration agreement is silent regarding matters such as discovery.

On the issue of explaining what "binding arbitration" means, Armendariz does not require that either.  The term "binding" is not too complex.

The labyrinth of requirements the courts are imposing in the name of "unconscionability" is going to make it hard for employers to create a "bullet-proof" agreement.  Sooner or later, a court will consider whether the unconscionability doctrine has been stretched too far, and that it is a back-door attack on the Federal Arbitration Act's preemption law.  Until then, employers should be aware that arbitration agreement law is in flux and that their agreements may be challenged on a variety of grounds that may not always be obvious.

This case is Wisdom v. Accentcare and the opinion is here.

NLRB Decide Class Action Waivers Violate the National Labor Relations Act

If you need more convincing that the National Labor Relations Board's work will affect the private-sector workplace (even after all the Facebook hoopla), here it is.

DR Horton, a home builder, imposed a mandatory arbitration agreement. The agreement required the employee to assert all claims related to his employment in arbitration.  The agreement further states:

that the arbitrator “may hear only Employee’s individual claims,” “will not have the author- ity to consolidate the claims of other employ- ees,” and “does not have authority to fashion a proceeding as a class or collective action or to award relief to a group or class of employees in one arbitration proceeding”

The NLRB first held, in agreement with its administrative law judge, that the arbitration agreement unlawfully precluded an employee from filing a charge with the NLRB.  So, arbitration agreements must carve-out the right to do so.

The groundbreaking part of the decision is that requiring an employee to arbitrate all claims and only on an individual basis violates the National Labor Relations Act's guarantee of the right to engage in "concerted activity":

[The arbitration agreement] requires employees, as a condition of their employment, to refrain from bringing collective or class claims in any forum: in court, because the [agreement] waives their right to a judicial forum; in arbitration, because the [agreement] provides that the arbitrator cannot consolidate claims or award collective relief. The [agreement] thus clearly and expressly bars employees from exercising substantive rights that have long been held protected by Section 7 of the NLRA.

The Board decided this case with just two members, because the lone Republican (Member Hayes) recused himself.  It is unfathomable why the Board did not wait until it had a full complement for such an important decision, but that's the way things go.  We'll see if the courts decide that the decision is invalid under the Supreme Court's decision in New Process Steel v. NLRB (discussed here) (Board must have three member quorum).  I did not research whether 2 + 1 recused member is sufficient or whether New Process Steel will apply.

The Board was careful to note that an arbitration agreement that permits class actions to be filed in court, while mandating arbitration of individual claims would be lawful:

We need not and do not mandate class arbitration in order to protect employees’ rights under the NLRA. Rather, we hold only that employers may not compel employees to waive their NLRA right to collectively pursue litigation of employment claims in all forums, arbitral and judicial. So long as the employer leaves open a judicial forum for class and collective claims, employees’ NLRA rights are preserved without requiring the availability of classwide arbitration. Employers re- main free to insist that arbitral proceedings be conducted on an individual basis.

This decision likely will be challenged in appeals court and then to the Supreme Court.  So, the arbitration see-saw is not going to stop swaying yet.  For now, though, arbitration agreements containing class action waivers are subject to attack before the National Labor Relations Board.  Plaintiff lawyers thinking of challenging arbitration agreements on this basis in court may run into something called "Garmon" preemption. :)

So, to sum up:
- class waivers in arbitration agreements are lawful, if the arbitration agreement applies only to claims brought on an individual basis;
- an arbitration agreement cannot prevent an employee from filing a charge
- this decision applies only to employers covered by the National Labor Relations Act (so it does not cover certain small employers, agriculture, government employees, etc.) Most private sector employers, union and non-union, are covered.
- this decision is subject to further review, and there will be lots of it.

The case is DR Horton and the decision is here.

DGV

Welcome Back, Arbitration?

I think the rumors of the demise of employment arbitration might have been exaggerated. I for one am guilty of presuming arbitration was dead. And who can blame me, what with the California courts and the 9th Circuit?

Well, today, the U.S. Supreme Court breathed new life into employment arbitration. The Court held that the Federal Arbitration Act preempts California case law prohibiting arbitration agreements that exclude class actions.

So, if arbitration agreements can require only individual arbitration, that means that employers may avoid those expensive California wage and hour class actions by properly implementing arbitration agreements.

The interesting question that the Supreme Court did not decide today is what about California case law imposing lots of other conditions and burdens on employment arbitration. The "Armendariz" line of cases impose special burdens on arbitration that do not apply equally to other kinds of contracts. If you read Concepcion a certain way, Armendariz will not be around long. For example consider this statement in the opinion:


Parties could agree to arbitrate pursuant to the Federal Rules of Civil Procedure, or pursuant to a discovery process rivaling that in litigation. Arbitration is a matter of contract, and the FAA requires courts to honor parties’ expectations. Rent-A-Center, West, 561 U. S., at ___ (slip op., at 3). But what the parties in the aforementioned examples would have agreed to is not arbitration as envisioned by the FAA, lacks its benefits, and therefore may not be required by state law.

Of course, I've been wrong before. Like when I thought arbitration was dead.

The case is AT&T Mobility LLC v. Concepcion and the opinion is here.

California Supreme Court Holds No Arbitration in Lieu of Labor Commissioner Hearing

The California Supreme Court decided that an employer cannot require an employee to go to arbitration instead of a "Berman" hearing before the Labor Commissioner.  Rather, the employee must be permitted to go to the labor commissioner and then the arbitration agreement can be used for the "appeal" de novo.
This 4-3 decision involves lengthy discussions of preemption and unconscionability. 

The majority, led by retiring Justice Moreno, finds that the waiver of the labor commissioner hearing deprives the employee of so many benefits that the arbitration agreement violates public policy.  The U.S. Supreme Court may take a look at this one under the Federal Arbitration Act.  Until then, though, employees get to see the Labor Commissioner, even if they have arbitration agreements.

The case is Sonic-Calabasas A, Inc. v. Moreno and the opinion is here.

Court of Appeal Moves the Arbitration Goal Posts Again

One of the frustrations with employment arbitration is that the courts continue to invent new ways of invalidating them. Employers who favor arbitration are stuck with re-issuing agreements with each new court decision.

The California Court of Appeal's decision in Trivedi v. Curexo Technology Corp. is the latest effort to invalidate arbitration contracts.

First, the court found that the arbitration agreement was "procedurally unconscionable." That is the first step, because a court has to find both procedural and substantive unconscionability. Since the employer usually presents an arbitration agreement as "take it or leave it," an arbitration agreement usually has some "procedural unconscionability" because it is an "adhesion contract" (take it or leave it.).

But the court did not stop at adhesion contract. In a footnote, the court said that the arbitration clause was in the same type face as the rest of the employment contract in which it was contained. The court found that its lack of "prominence" was "one factor" courts consider in determining unconscionability. With this statement, the court proves once again that the doctrine of "unconscionability" is being used as an end-run around the Federal Arbitration Act. If the court required "prominence" as a condition of enforcing the agreement, the requirement would plainly violate the U.S. Supreme Court's decision in Doctor's Associates v. Cassarotto, 517 U.S. 681 (1996). In that case, Montana required arbitration agreements to be in all-caps and on the first page of a contract.

But wait, there's more. The court also held that the employer referenced the American Arbitration Association employment arbitration rules. These rules are expressly DESIGNED to implement procedural fairness. Get this - the employer did not attach the rules to the arbitration agreement. As a result, the court found, the agreement was procedurally unconscionable(!)
I just linked to the rules above. They're as easy to obtain as the Code of Civil Procedure or California case law. The employer did not attach the Code of Civil Procedure either. If the AAA rules were not used, would the agreement have been unconscionable because the Code of Civil Procedure was not attached? What if the California Supreme Court's Armendariz case was not attached? (That case imposes several requirements on lawful agreements.)

Anyway, the court then turned to substantive unconscionability. The arbitration agreement permitted the arbitrator to award fees to the prevailing party. The court held this provision to be unconscionable, because case law says that defendants may recover fees in FEHA cases only when the plaintiff's claims are frivolous, unreasonable, or without foundation. The funny thing is that the FEHA statute itself simply says that the "prevailing party" may recover fees. So, the decision requires the arbitration agreement to spell out what case law says?? The court ignored the reality that the arbitrator will consider case law in making his or her decision. The court also dismissed the employer's argument that the AAA rules require the arbitrator to award fees in accordance with applicable law.

The court also concluded that the agreement's reference to injunction relief was consistent with the Code of Civil Procedure, but was nevertheless evidence of unconscionability. The logic is that the employer would take advantage of that provision more frequently than the employee. The court leaves us to guess how a provision that is no broader than an existing statute is evidence that an agreement is invalid.

Finally, the court refused to sever the attorney's fees or injunction provision. It found the agreement was "permeated" by unconscionability because of the injunctive relief and attorney's fees provisions. The court neglected to cite the key case on severability, Little v. Auto Stiegler Inc., 29 Cal.4th 1064 (2003). The court also made no mention of how the agreement was "permeated" with unconscionability given the rather mild clauses the court found to be unconscionable.

Anyway, if this case stays on the books, it's going to require significant changes to arbitration agreements. Employers should consider either directing employees to dispute resolution rules on the web or, preferably, give the employees a copy with the agreement. Additionally, attorney's fees and injunctive relief provisions should contain the qualifying language, "as permitted by applicable law."

This case is a good example of why the U.S. Supreme Court is going to decide whether these "unconscionability" cases are a mere end run around the Federal Arbitration Act. Look for the Court's decision in AT&T v. Concepcion in a few months. Ross Runkel's excellent resources on Concepcion are here.

The decision in Trivedi v. Curexo Technology Corp. is here.

DGV

U.S. Supreme Court Issues Two More Arbitration Decisions

The U.S. Supreme Court closed out its employment cases for the 2010 Term with two arbitration decisions. The Court held in one opinion that the arbitrator must resolve an arbitrability issue. The Court reached the opposite result in the other. Here's what happened.

In Granite Rock Co. v. Teamsters, the company and its union agreed on a new contract. But the Company would not agree to hold the union harmless for strike-related damage. The union continued to strike. The company argued the strike violated the "no-strike" clause in the parties' new contract, which also contained an arbitration clause. The union believed the agreement was not properly ratified and, therefore, not a contract when the strike occurred.

Granite sued the Teamsters in federal court alleging breach of contract against the local union, and interference with contract against the International. District court allowed a jury to decide when the agreement was ratified - which determined if the strike was arbitrated or resolved in court. Once the jury decided the agreement was properly ratified, the district court sent the case to arbitration over the merits of the breach of contract issue. The Ninth Circuit, though, held that the arbitrator should have decided the ratification issue.

The Supreme Court held the district court got it right. The court was required to decide if the parties agreed to arbitrate the breach of the no-strike clause issue, because courts enforce arbitration only to the extent the parties agreed. The date the contract was ratified amounted to a dispute over the applicability of arbitration to the dispute. If ratified, there would be a valid contract. Here's how the court put it:

a court may order arbitration of a particular dispute only where the court is satisfied that the parties agreed to arbitrate that dispute. See First Options, supra, at 943; AT&T Technologies, supra, at 648−649. To satisfy itself that such agreement exists, the court must resolve any issue that calls into question the formation or applicability of the specific arbitration clause that a party seeks to have the court enforce. See, e.g., Rent-A-Center, West, Inc. v. Jackson, ante, at 4−6 (opinion of SCALIA, J.). Where there is no provision validly committing them to an arbitrator, see ante, at 7, these issues typically concern the scope of the arbitration clause and its enforceability. In addition, these issues always include whether the clause was agreed to, and may include when that agreement was formed.

So, the court, not the arbitrator, had to decide when the contract was ratified.

This decision was 7-2, authored by Justice Thomas. Justices Sotomayor and Stevens dissented from this part of the opinion, but joined in the unanimous decision that there is no claim for tortious interference under federal law.

The opinion in Granite Rock Co. v. Teamsters is here.

Just a couple of days earlier, though, the Court held in Rent-a-Center West, Inc. v. Jackson that the arbitrator must decide arbitrability, albeit in a different context. Granite was decided under Section 301 of the LMRA. Rent-a-Center is a Federal Arbitration Act case. But the Court cites FAA decisions in Granite, too. So, the analysis is probably the same.

Jackson sued for employment discrimination in Nevada federal court. Rent-a-Center sought to compel arbitration. Jackson argued the agreement was "unconscionable" under Nevada law, which is a defense to the enforceability of the arbitration agreement.

But the arbitration agreement provided: "[t]he Arbitrator, and not any federal, state, or local court or agency, shall have exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this Agreement including, but not limited to any claim that all or any part of this Agreement is void or voidable."

So, unlike in Granite, the parties' agreement expressly gave the arbitrator the authority to determine whether the agreement was void, or enforceable. The Court held that, given the parties' "clear and unmistakable" agreement, any dispute over this provision was itself a question for the arbitrator to resolve:

The delegation provision is an agreement to arbitrate threshold issues concerning the arbitration agreement. We have recognized that parties can agree to arbitrate"gateway" questions of "arbitrability," such as whether the parties have agreed to arbitrate or whether their agreement covers a particular controversy.

The Court then analyzed whether the FAA permitted the court to permit the arbitrator to decide if the agreement was unconscionable. The Court held that the FAA did permit this. In particular, the court decided that Jackson alleged the entire arbitration agreement was invalid, not exclusively the provision conferring on the arbitrator the right to decide unconscionability. Had Jackson been able to argue this delegation provision alone was unconscionable (and how would he do that?) the court may have come down a different way.

Therefore, Jackson's challenge to the arbitration agreement as "unconscionable" must be decided by the arbitrator.

If arbitration agreements reserve the power to decide unconscionability to the arbitrator, that will certainly affect courts' power to decide "unconscionability" claims by plaintiffs seeking to avoid arbitration agreements.

This one was 5-4. The dissent argued the majority simply got it wrong, synthesizing the law as follows:

questions related to the validity of an arbitration agreement are usually matters for a court to resolve before it refers a dispute to arbitration. But questions of arbitrability may go to the arbitrator in two instances: (1) when the parties have demonstrated, clearly and unmistakably, that it is their intent to do so; or (2) when the validity of an arbitration agreement depends exclusively on the validity of the substantive contract of which it is a part.

The majority believed this rule required arbitration because both prongs were satisfied. But the dissent argued (1) because the agreement was alleged to be unconscionable, Jackson could not have "clearly and unmistakably" submitted arbitrability to the arbitrator. The dissent also argued

when a party raises a good-faith validity challenge to the arbitration agreement itself, that issue must be resolved before a court can say that he clearly and unmistakably intended to arbitrate that very validity question. This case well illustrates the point: If respondent’s unconscionability claim is correct—i.e., if the terms of the agreement are so one-sided and the process of its making so unfair—it would contravene the existence of clear and unmistakable assent to arbitrate the very question petitioner now seeks to arbitrate. Accordingly, it is necessary for the court to resolve the merits of respondent’s unconscionability claim in order to decide whether the parties have a valid arbitration agreement under §2. Otherwise, that section’s preservation of revocation issues for the Court would be meaningless.

The bottom line: unless or until Congress overturns this decision, it appears employers will be able to avoid courts' rulings on unconscionability and have arbitrators decide them instead.

The opinion in Rent-a-Center West, Inc. v. Jackson is here.