ARBITRATION AGREEMENTS ARE IN THE SPOTLIGHT IN 2019

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ARBITRATION AGREEMENTS ARE IN THE SPOTLIGHT IN 2019

Arbitration agreements are in the spotlight because of the #MeToo movement and the Supreme Court’s decision in Epic Systems Corp. v. Lewis, said Katherine Sandberg, an attorney with Fisher Phillips in Sacramento, CA. The case was decided by the Supreme Court of the United States on how two federal laws, the National Labor Relations Act and the Federal Arbitration Act, relate to whether employment contracts can legally bar employees from collective arbitration. The decision was issued in May 2018 and the Court ruled that arbitration agreements requiring individual arbitration are enforceable under the FAA, regardless of allowances set out within the NLRA.

In Henry Schein, et al v. Archer & White Sales, Inc.,the issue was whether under the Federal Arbitration Act, a court may disregard a provision in an arbitration agreement delegating to the arbitrator the authority to determine whether a particular claim is arbitrable under the agreement if the court determines that a party’s argument in favor of arbitration is “wholly groundless.” On January 8, 2019, the Supreme Court decided that the Federal Arbitration Act allows parties to agree by contract that an arbitrator can decide threshold questions of arbitrability, rather than a court. While some federal courts have embraced by a “wholly groundless” exception to resolve arbitrability questions even in the face of such an agreement, a unanimous Court held that lower courts must respect the parties’ choice to delegate arbitrability questions to the arbitrator.

In the California case, Lamps Plus Inc. v. Varela, the high court will consider whether an arbitration agreement with general language stating that “arbitration shall be in lieu of any and all lawsuits or other civil legal proceedings” waived an employee’s right to bring a class-action claim.  A decision is pending.

In New Prime Inc. v. Oliveira, the high court considered whether arbitration agreements are enforceable against long-haul truck drivers who were classified as independent contractors. There is an exception to the Federal Arbitration Act for “contracts of employment” with workers who engage in interstate commerce. The question in this case is whether the exception applies to drivers who operate as independent contractors rather than employees. The Supreme Court focused on two legal issues:

  1. Should a court determine whether a Section 1 exclusion to the FAA applies before ordering arbitration where the parties’ contract contains a delegation clause?
  2. Does the transportation worker exclusion apply to independent contractors as well as employees?

On January 15, 2019, the Court issued a unanimous decision and answered both inquiries in the affirmative.