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Supreme Court Upholds Company’s Right To Require Arbitration

Many employers ask employees to sign arbitration agreements requiring them to arbitrate any claims they may have against the company, waiving the right to file a claim in court. Both the United States Supreme Court and courts in Pennsylvania have been open to these kinds of agreements, as long as the employees are not saddled with the costs of the arbitration, and as long as employees can obtain sufficient satisfaction on their claims in arbitration. Employers may prefer arbitration as a way to save on potential litigation costs.

In DIRECTV, Inc. v. Imburgia, No. 14-462 (December 14, 2015), the United States Supreme Court again confirmed that arbitration provisions will be broadly interpreted. In this case, DIRECTV required customers to sign agreements containing a binding arbitration provision. The arbitration provision contained a class-arbitration waiver, that is, a requirement that neither party could join or consolidate claims in arbitration. The arbitration provision further provided that, if the law of the customer’s state made such a waiver unenforceable, the entire arbitration provision would be unenforceable. The arbitration provision also stated that it was to be construed pursuant to the Federal Arbitration Act (“FAA”).

Imburgia sued DIRECTV in California state court, claiming that the arbitration provision was unenforceable under California law. This was based on a 2005 California case that held that most class-arbitration waivers were unenforceable. In 2011, however, the United States Supreme Court in AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), held that the California case was preempted by the FAA.

The California court upheld the consumer’s right to bring a court action, rather than go to arbitration. The Supreme Court disagreed. It held that the wording in the contract that the law of the state would control did not include state laws that have been held to be invalid, and that the California court’s attempts to find otherwise must fail. The Supreme Court stated that the California court’s decision did not give “due regard . . . to the federal policy favoring arbitration.” DIRECTV at 10 (internal quotations and citation omitted).

What Does This Case Mean For You? While this case did not involve employment law, it has implications for employers who want to have their employees sign agreements containing arbitration provisions. It reinforces that federal policy, under the FAA, favors arbitration. If you have arbitration agreements with your employees or if you may have them in the future, please note that the arbitration provisions should be fair to the employee, should allow the employee to file a claim without incurring arbitration costs, and should allow the employee to recover damages similar to what he or she could recover in court.

If you have any questions or are interested in employee arbitration agreements, please contact Whitney Rahman at (717) 509-7237 or at swr@blakingerthomas.com.

**This update is provided for informational purposes only and
should not be construed as legal advice or as creating an
attorney-client relationship where one does not already exist**