Federal Arbitration Act (FAA)

The New Year brings new laws for Illinois employers. Some laws go into effect this Summer, while others are effective as of this month. For employers who have not yet revised handbooks, policies and agreements, the time is now. Below is a brief summary of the new laws.
Continue Reading The Time Is Now for Employers in Illinois to Abide by New Laws

On June 26, 2019, Southern District of New York Judge Denise Cote granted a motion to compel arbitration of a plaintiff’s sexual harassment claims finding that the New York State prohibition on mandatory arbitration of sexual harassment claims is preempted by the Federal Arbitration Act (“FAA”). As we mentioned in our blog upon this law’s enactment, the United States Supreme Court has routinely held that state laws expressly identifying a category of non-arbitrable state law claims are preempted by the FAA. In Latif v. Morgan Stanley & Co., the Southern District followed the Supreme Court and found the New York ban on mandatory arbitration of sexual harassment claims unenforceable.
Continue Reading Southern District of New York Invalidates State Ban on Mandatory Arbitration of Harassment and Discrimination

In a 2010 decision, Stolt-Nielsen S. A. v. Animalfeeds International Corp., the United States Supreme Court held that parties may not be compelled to submit to class arbitration under the Federal Arbitration Act (FAA) unless there is a contractual basis for concluding that they agreed to do so. The Court held that such an agreement could not be presumed from the fact that the arbitration agreement is “silent” on the issue of class arbitration or the mere fact that the parties agreed to arbitrate.
Continue Reading U.S. Supreme Court Upholds Individualized Arbitration Where Agreement Is Ambiguous on Issue of Class Arbitration

While arbitration as a form of alternative dispute resolution (“ADR”) has long had a presence in American jurisprudence, a recent Supreme Court decision —coupled with significant cultural trends —have left many employers and legislators wondering about the continued viability of mandatory pre-dispute arbitration for all employment disputes.

Is the FAIR Act Fundamentally Unfair to Employers?

On February 28, 2019, U.S. Representative Hank Johnson (D-GA) and U.S. Senator Richard Blumenthal (D-CT) introduced “The Forced Arbitration Injustice Repeal Act” (“FAIR Act”) which seeks to (1) prohibit pre-dispute arbitration agreements that force arbitration of future employment, consumer, antitrust, or civil rights disputes, and (2) prohibit agreements and practices that interfere with the rights of individuals, workers, and small businesses to participate in a joint, class, or collective action related to an employment, consumer, antitrust, or civil rights dispute.

The Senate bill is S. 610. It has 33 co-sponsors, all Democrats. It has been referred to the Senate Judiciary Committee, where it is unlikely to receive consideration. The House bill (H.R. 1423), on the other hand, has been referred to the House Judiciary Committee where it is likely to receive active consideration. It has 160 co-sponsors.
Continue Reading New Federal Legislation Seeks to Eliminate Mandatory Arbitration Agreements

On January 15, 2019, the Supreme Court issued its decision in New Prime Inc. v. Oliveira, where it decided independent contractor truck drivers cannot be forced into arbitration.  The Court’s decision is based on Federal Arbitration Act § 1, which excepts from coverage disputes involving “contracts of employment” with “workers engaged in foreign or interstate commerce.” 
Continue Reading SCOTUS Holds Independent Contractor Truck Drivers Exempt from Arbitration Under FAA

On January 8, 2019, the United States Supreme Court issued a unanimous opinion in Henry Schein, Inc. v. Archer & White Sales, Inc. strengthening the enforceability of arbitration “delegation clauses.” These clauses have been previously upheld by the U.S. Supreme Court and allow parties to agree that an arbitrator, rather than a court, will decide the threshold issue of whether a dispute must be arbitrated, as well as the merits of the dispute. The Supreme Court in Henry Schein rejected a doctrine adopted by several federal Circuit Courts of Appeals and the California Court of Appeal, which permitted courts to decline to enforce delegation clauses if the underlying assertion of arbitrability was “wholly groundless.” Under Henry Schein, courts must refer questions of arbitrability to the arbitrator when the parties have agreed to a clear and unmistakable delegation, even if the court believes the claim of arbitrability is frivolous.
Continue Reading U.S. Supreme Court Rejects ‘Wholly Groundless’ Exception to Delegation Clauses in Arbitration Agreements

Many employers require employees to sign arbitration agreements at the inception of the employment relationship and prior to any disputes, such as part of their new hire packets or as a condition of their employment.  Recently, Congressional Democrats have introduced legislation to invalidate such pre-dispute arbitration agreements.
Continue Reading Congress Considers Limiting Pre-dispute Arbitration Agreements in the Employment Context

On August 22, 2016, the Ninth Circuit joined the Seventh Circuit in the split amongst U.S. Circuit Courts of Appeal on the issue of enforceability of employment arbitration agreements precluding class actions.

The Ninth Circuit, similar to the Seventh Circuit in Lewis v. Epic Sys. Corp., held in 2-1 decision that an employer violates the National Labor Relations Act (NLRA) when it requires employees to sign an agreement precluding them from pursuing, in any forum, wage-and-hour claims against the employer on a collective basis.  To the contrary, the Fifth Circuit has upheld such arbitration agreements in D.R. Horton, Inc. v. NLRB and Murphy Oil USA, Inc. v. NLRB, finding that class action waivers do not violate the NLRA.


Continue Reading Ninth Circuit Invalidates Arbitration Agreement

On May 26, 2016, in the matter of Lewis v. Epic Systems Corporation, the U.S. Court of Appeals for the Seventh Circuit held that an arbitration agreement, which required employees to submit to individual arbitration for any wage and hour claims against the company, violates the National Labor Relations Act (“NLRA”) and is unenforceable under the Federal Arbitration Act (“FAA”).  In issuing this decision, the Seventh Circuit gave credence to the National Labor Relations Board’s (“NLRB”) decision in D. R. Horton and, in doing so, has created a split amongst U.S. Circuit Courts of Appeal regarding the enforceability of arbitration agreements that preclude class actions.
Continue Reading Seventh Circuit Holds Class Action Waivers are Unlawful and Unenforceable Creating a Circuit Split

A recent ruling by the New York State Court of Appeals underscores the Federal Arbitration Act’s (“FAA”) strong policy favoring enforcement of arbitration agreements—even in the insurance industry and despite federal policy generally favoring state regulation of the business of insurance. 
Continue Reading New York’s Highest Court Enforces Arbitration Provision in California Workers’ Compensation Insurance Agreement, Rejecting McCarran-Ferguson “Reverse Preemption”

The United States Supreme Court recently reversed a decision by the California Court of Appeal wherein the state court refused to enforce a class action waiver in an arbitration agreement. The Supreme Court enforced the class arbitration waiver holding that the Court of Appeal’s decision was pre-empted by the Federal Arbitration Act (FAA) as interpreted by the Court in AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), which held that class arbitration waivers are enforceable unless grounds exist at law or in equity for the revocation of any contract.
Continue Reading Arbitration Wars: Supreme Court Continues To Affirm The Supremacy of the FAA