In a unanimous opinion decided this January, the United States Supreme Court continued its expansive reading of the Federal Arbitration Act and arbitration provisions, rebuffing an effort by some to erect an additional hurdle that would interfere with an employers’ ability to enforce arbitration agreements. The case is Henry Schein Inc. v. Archer and White Sales Inc.
By rejecting the “wholly groundless” exception that courts had used to “spot-check” whether a claim of arbitrability was plausible before compelling arbitration, all lower federal courts must now compel arbitration in all cases where the parties have agreed to delegate the issue of “who decides what is arbitrable” to an arbitrator.
The Court’s decision – the first authored by Justice Brett Kavanaugh – extinguishes a conflict among various circuit courts of appeal and provides uniform guidance to employers who use arbitration agreements throughout the country. Employers should familiarize themselves with the ruling in order to ensure that their dispute resolution plans are fully compliant and in line with this decision.
In keeping with its recent interest in defining the contours of the FAA, the Court accepted the case to clear up the conflict among the circuit courts. A unanimous Court reiterated that it meant what it said in the 2009 Rent-A-Center, West Inc. v Jackson case and that the parties are certainly free to delegate issues of arbitrability to an arbitrator: “The FAA does not contain a ‘wholly groundless’ exception, and we are not at liberty to rewrite the statute passed by Congress and signed by the President.” The Court went further and confirmed it saw no reason to “engraft our own exceptions onto the statutory text.”
There’s a double dose of good news for employers in the Henry Schein ruling. First off, the decision clears up conflicting case law in the various circuits, and employers now know there is a uniform interpretation as to the enforceability of parties’ delegations of arbitrability to an arbitrator. Second, the decision sweeps aside a possible hurdle that might have otherwise existed in trying to enforce an arbitration agreement with employees.
However, liberal legislators are very unhappy with the broad rights to arbitrate agreements. Congress has once again proposed legislation that would seek to ban mandatory workplace arbitration of employment claims, despite a string of United States Supreme Court decisions upholding arbitration and class/collective action waivers as a lawful and appropriate mechanism to resolve workplace disputes.
H.R. 7109, the Restoring Justice for Workers Act, was introduced by Representative Jerrold Nadler, D-N.Y., and Representative Bobby Scott, D-Va., with 58 Democratic co-sponsors. Similar legislation is expected to be introduced in the Senate by Senator Patty Murray, D-Wash, with eight Democratic co-sponsors. The proposed legislation would overturn the U.S. Supreme Court’s decision in Epic Systems, and would amend the National Labor Relations Act to specifically prohibit class and collective action waivers under a new “Section 8(a)(6).”