Class Action Arbitration

Our firm generally recommends our clients, when appropriate, include a class action arbitration waiver in their employment agreements. The U.S. Supreme Court’s recent ruling in Lamps Plus v. Varela provides companies with a much stronger position regarding class action arbitration cases.

A class action allows multiple plaintiffs to join together in suing one defendant.   While this is allowed in litigation, the use of a class action in arbitration has always been somewhat unclear. 

Lamps Plus required its employees to sign an agreement with a mandatory arbitration clause for any dispute against the company, but the agreement was silent as to whether class action arbitration was allowed. When Lamps Plus’s employees’ attempt to institute a class action arbitration was challenged, the lower courts allowed the claimants to move forward on a class basis.  Ultimately though, the U.S. Supreme Court rejected the lower court’s position and held a party can only be bound to class action arbitration if specifically allowed for in the arbitration agreement.

The Court’s decision reinforces the importance of specificity in arbitration agreements—in other words, silence cannot be assumed to be consent.  If you have questions about the effectiveness of your employment agreements, contact Rosenblatt Law Firm today.