In Rent-A-Center, West, Inc. v. Jackson, 130 S.Ct. 2772 (2010), the Court held that, when an arbitration agreement explicitly delegates to an arbitrator the power to decide whether the agreement itself is enforceable, then only the arbitrator may decide whether the agreement is enforceable. Courts may consider only a specific challenge to the delegation provision itself. In that case, an employee who had signed an arbitration agreement with his employer later filed suit for employment discrimination and challenged the arbitration agreement as “unconscionable.” The trial court rejected that argument and ordered arbitration, but the Ninth Circuit Court of Appeals reversed, holding that a court must decide any threshold claim of “unconscionability” before ordering arbitration. The Supreme Court reversed, holding that parties can agree to arbitrate “gateway” questions of arbitrability, such as whether the arbitration agreement itself is unenforceable because it is “unconscionable.”
This decision is important for employers because it should put an end to efforts in some jurisdictions (such as the Ninth Circuit) to avoid arbitration by having courts decide threshold arbitrability issues. To take advantage of this decision, employers with arbitration agreements should ensure that those agreements expressly delegate to the arbitrator authority to resolve all disputes relating to enforceability of the agreement, including any claim that all or part of the agreement is void or voidable.
In Stolt-Bielsen S.A. v. AnimalFeeds International Corp., 130 S.Ct. 1758 (2010), the Court held that a party cannot be compelled to engage in class-action arbitration unless it has agreed to do so, and that arbitrators (and courts) cannot presume such an agreement from the fact that the arbitration agreement is silent on the question of class arbitration. Although that case involved a commercial dispute, the ruling should apply with equal force to employer-employee arbitration agreements.
Unfortunately, this case does not resolve the related issue of whether an employer-employee arbitration agreement that bans class-action arbitration is unconscionable and unenforceable for that reason. To date, courts continue to split on this issue. Compare Ingle v. Circuit City Stores, Inc., 328 F.3d 1165 (9th Cir. 2003) (class action bar in arbitration agreement is unconscionable under California law), with Rains v. Foundation Health Systems Life & Health, 23 P.3d 1249 (Colo. App. 2001) (arbitration clause not unenforceable simply because it might render class action unavailable).