In yet another split 5-4 decision, the U.S. Supreme Court ruled in Lamps Plus v. Varela that employees at a California business could not band together in a class-wide arbitration. Instead, the Supreme Court ruled, each employee was required to proceed independently in an individual arbitration.
The Supreme Court acknowledged that the arbitration agreement that had been signed by the employee was “ambiguous” as to whether class arbitrations were allowed. But that ambiguity offered no help to the employee . According to the Court, even when confronted with an ambiguous arbitration agreement, that ambiguity cannot be interpreted to infer or imply agreement to class-wide arbitration. “Consent is essential under the [Federal Arbitration Act],” ruled the Court. And without explicit consent to class-wide arbitration, it was not allowed.
Many states, like California, have rules that interpret ambiguous contract language against the drafter of the contract. That rule in California, if applied to this case, would have worked in the employees’ favor because Lamps Plus and their attorneys had drafted the arbitration agreement at issue. But the Court rejected that rule, too, on the theory that the Federal Arbitration Act pre-empts any state law laws or rules that impede or frustrate its goal — to promote arbitration as a freely available alternative to costly litigation.
This decision, which was cheered by employers across the country, will make it more difficult for employees who, collectively, have significant injuries. When each employee’s individual damages are minor, it means each employee will likely choose not to pursue it. The cost and stress of arbitration, for a minor recovery, is likely not worth it.
You can read the Supreme Court’s decision in Lamps Plus v. Varela here.