The Lamps Plus Decision: U.S. Supreme Court Closes Another Door for Class Challenges to Employment Practices

Today the Supreme Court in Lamps Plus v. Varela, a 5-4 decision along partisan lines, again interpreted the Federal Arbitration Act (FAA) to limit the ability of employees to pursue legal grievances as a group.  The case holds that when an arbitration agreement is ambiguous about whether or not the employee has the right to bring class claims in arbitration (i.e., some language in the agreement suggests that class proceedings are available, but other language suggests the contrary), the employee is prohibited from bringing class claims.  The Ninth Circuit Court of Appeals had reached the opposite conclusion. 

The Supreme Court’s stated rationale was that although the corporate defendant's arbitration agreement had required its employee to bring all claims in arbitration, the agreement had been ambiguous about whether the employee would have the right to bring class claims in arbitration; therefore, the Court could not be certain that the defendant had intended to consent to the employee having the right to bring anything other than individual claims in arbitration.  Thus, the employee was foreclosed from bringing a class claim in any venue -- court or arbitration.  Although the employee was challenging a single action by the Company that had allegedly harmed 1,300 employees, under the Court's ruling, every employee who had signed the arbitration agreement would be able to challenge the action only if he or she was willing to pursue an individual arbitration against the Company.

The practical impact of this particular decision may be limited because arbitration agreements drafted since 2011, when the Supreme Court decided AT&T Mobility v. Concepcion, tend to explicitly prohibit class proceedings in arbitration, rather than being ambiguous on that point.  The Concepcion decision -- also a 5-4 decision along partisan lines -- struck down the ability of states to preserve access to class actions for their citizens in certain contexts.

From the perspective of defendants, the Lamps Plus ruling further cements the ability of arbitration agreements to eliminate class challenges by employees in any forum – even ambiguous agreements that some courts had previously held allowed class arbitration claims.  From the perspective of employee advocates, the conservative majority of the Supreme Court has, over the past decade, expanded the FAA beyond Congress’s purpose in enacting that law in 1925, and in doing so has created a major barrier to enforcement of the laws protecting employees.  Justice Ginsburg’s dissents in recent arbitration cases, including Lamps Plus, have called for legislative action:  “Congressional correction of the Court’s elevation of the FAA over the rights of employees and consumers to act in concert remains urgently in order.”