In recent years, the changing litigation landscape has caused many employers to roll out binding arbitration programs that apply to all employees.  The primary impetus for this is the threat of runaway juries.  Many employers would rather take their chances with an arbitrator than leave their case up to jurors who often identify more closely with employees than they do with management.

Another advantage of arbitration is the ability to avoid employee class actions and collective actions, which can turn a relatively insignificant single employee case into high stakes, "bet the company" litigation.  Employers can require employees (and their attorneys) who otherwise would be able to bring a class action in court, to bring multiple single plaintiff claims in arbitration.  The end result is that employees will be less likely to find attorneys who will be willing to take their case.

Courts in recent years have been amenable to the concept that properly worded arbitration agreements can bar class actions and collective action claims in arbitration.  Indeed, as a result of Stolt-Nielsen v. Animal Feeds International Corp., a 2009 U.S. Supreme Court case, it appeared that class/collective action arbitrations were prohibited in arbitration unless the arbitration agreement at issue explicitly provided for them.   

But, yesterday the Supreme Court in Oxford Health Plans LLC v. Sutter emphasized that careful drafting is the key.  If the arbitration agreement is ambiguous regarding whether class action arbitrations are allowed, then the issue is left up to the interpretation of the arbitrator.  And, as happened in Oxford, if the arbitrator decides that class action arbitrations are allowed, his decision will likely be final.

The lesson here is that employers must make sure that their arbitration agreements are drafted carefully and correctly, so as to explicitly prohibit the arbitration of class and collective action claims.  If an employer’s currently operational arbitration agreement leaves any doubt about this issue, the employer should have a labor and employment attorney revise it.