The dispute giving rise to this case began in 2016, when a hacker tricked a Lamps Plus employee into disclosing the tax information of around 1,300 employees. Following the data breach, a fraudulent tax return was filed under employee Frank Varela’s name. Mr. Varela filed a class-action lawsuit against Lamps Plus on behalf of himself and the other employees who had their data stolen. Lamps Plus moved for the case to be dismissed as Mr. Varela had signed an arbitration agreement that required all employment-related disputes to be resolved by a private arbitrator. Lamps Plus also asked the court to require Mr. Varela to only pursue his own claim in arbitration, rather than on behalf of the other affected employees. The trial court agreed that arbitration was the exclusive forum for resolving the dispute but found that the arbitration agreement allowed for class arbitrations.
The Supreme Court reversed the decision. The Court’s rationale relied primarily on its 2010 decision in Stolt-Nielsen v. AnimalFeeds Int’l Corp., in which it held that, under the Federal Arbitration Act (FAA), when an agreement is silent on the subject of class arbitration, there is no basis for an arbitrator (or court) to order class arbitration. The Court held that ambiguity, rather than silence, is subject to the same general rule—if the agreement does not specifically address the use of class arbitration, it cannot be inferred that the parties agreed to it. Thus, because the Lamps Plus agreement did not specifically address class arbitration, the FAA prohibits use of the procedure.
Considerations for Employers
The Lamps Plus case provides three big takeaways for employers.
1. Arbitration agreements apply to an employer and a single employee, unless they affirmatively state otherwise.
2. While the Supreme Court has repeatedly said that class arbitrations sacrifice the main advantages of arbitration—efficiency, informality, and lower costs—this may not actually be true in all cases. Employers should consider whether certain types of claims, such as wage claims, might be resolved more efficiently through a class arbitration, rather than individually arbitrating the claims of tens or even hundreds of employees.
3. Employers should review their existing arbitration agreements to determine whether they specifically address class actions. If not, employers should consider whether it is in their best interest to add a class action waiver, include a clause specifically allowing class action arbitration in some or all cases, or leave them silent on the issue.
If you have questions on an arbitration agreement in light of the Lamps Plus case, please contact Trevor Caldwell at firstname.lastname@example.org or (503) 276-2117, or Amy Angel at email@example.com or (503) 276-2195.
Electronic Alerts are written by Barran Liebman attorneys for their clients and friends. Alerts are not intended as legal advice, but as employment law, labor law, and employee benefits announcements. If this has been forwarded to you, and you would like to begin receiving Electronic Alerts directly, please email or call Traci Ray at 503-276-2115. Copyright ©2020 by Barran Liebman LLP.
Las Alertas electrónicas son escritas por abogados de Barran Liebman para sus clientes y amigos. Las Alertas no son proveídas como asesoramiento legal, sino solo como anuncios de leyes de empleo, leyes laborales y beneficios de empleo. Si esto ha sido remetido a usted y quisieras empezar a recibir las Alertas directamente, por favor mándanos un correo electrónico o llama a Traci Ray al 503-276-2115. Derechos de autor ©2020 por Barran Liebman LLP.