Continuing to uphold the enforcement of arbitration agreements, the U.S. Supreme Court has struck down the California courts’ refusal to enforce class action waivers in consumer arbitration agreements on the ground that the state law is preempted by the Federal Arbitration Act. AT&T Mobility LLC v. Concepcion, No. 09-893 (Apr. 27, 2011). The ruling would appear to apply to arbitration agreements in the employment context as well. The Court reversed the decision of the Ninth Circuit Court of Appeals, which had held that AT&T’s arbitration clause was unconscionable and unenforceable under California law.
Although AT&T Mobility involved a consumer contract, the principles and rationale of the decision appear to be fully applicable to arbitration clauses in employment contracts. Based on the Supreme Court’s decision in Concepcion, it would appear that such clauses are valid and enforceable. Employers who utilize arbitration agreements should seek legal advice in the preparation of class action waiver provisions and for the drafting of arbitration clauses generally. Employers that do not utilize arbitration may want to consider whether such a policy is right for them and, if so, what type of alternative dispute resolution program would work for their organization. For a detailed analysis, please see Supreme Court Strikes Down California’s Prohibition of Class Action Waivers in Arbitration Agreements