The now more conservative Supreme Court continues to expand the powers of business to resolve employment disputes through arbitration. The 5-4 ruling found the justices voting along ideological lines. Here the judges ruled that workers are not able to resolve disputes through class action when the language of the arbitration agreement is vague or ambiguous.
In this case, the ruling was Lamps Plus vs. Varela, where employee Frank Varela sued employer Lamps Plus for allowing hackers to steal sensitive tax information of hundreds of employees. Varela request for class action was initially allowed until the Supreme Court ruled.
This is the latest in a string of rulings, following 2018’s Epic Systems Corp. vs. Lewis, that forces workers to use individual arbitration rather than a class action. By using individual arbitration, critics believe this gives the advantage to the employer and allows abuses to go unchecked. Businesses like the fact that it is a more streamlined format because it allows employers to handle each case individually.
Consent cited as the reason
Chief Justice John Roberts argued that SCOTUS’s precedent of arbitration is a matter of consent, which cannot be inferred from an employment agreement that is vague or ambiguous. The decision overturned the U.S. 9th Circuit Court of Appeals, which had ruled that the party who drafted the employment agreement with vague language in their contract not only could but should be ruled against.
Now the employer has to expressly consent for a class action to proceed. However, several companies, including Google and Facebook, expressly allow class action in their contracts particularly when sexual harassment is involved. This and similar clauses could also be selling points for businesses who wish to attract employees.
Is class action the right approach?
Those businesses with questions about potential class actions and employment contracts are advised to consult with a law firm with a strong background in handling these types of business matters, whether it is in light of this recent ruling, or others that are sure to follow over time.