By Steven W. Suflas, Alan S. Kaplinsky, Mark J. Levin, Burt M. Rublin, and Michelle M. McGeogh
In Opalinski v. Robert Half International, Inc. [enhanced opinion available to lexis.com subscribers], the United States Court of Appeals for the Third Circuit held that where an arbitration clause is silent as to the availability of classwide arbitration, that issue should presumptively be decided by a court, not an arbitrator, unless the agreement specifically reserves that decision to the arbitrator.
Two former employees of Robert Half International, Inc., sued it on behalf of themselves and other coworkers, alleging that they were not paid overtime in violation of the Fair Labor Standards Act. The plaintiffs both signed employment agreements containing arbitration provisions that were silent on classwide arbitration.
Robert Half moved to compel individual arbitration of the employees’ claims. In October 2011, the U.S. District Court compelled arbitration and held that the arbitrator should decide whether classwide arbitration was available. The arbitrator ultimately issued an initial partial award and ruled that the employment agreements permitted classwide arbitration. The employer asked that the District Court vacate the partial award, but that request was denied.
Robert Half appealed the denial of its motion and asserted that the availability of classwide arbitration should have been decided by the court, rather than the arbitrator. The Third Circuit agreed.
Noting that the U.S. Supreme Court has yet to conclusively decide the issue, the Third Circuit agreed with a Sixth Circuit decision rendered last year holding that the availability of classwide arbitration is a “question of arbitrability,” which is a “gateway” issue for a court to decide. The Third Circuit reasoned that the availability of classwide arbitration implicates whose claims the arbitrator may resolve and the type of controversy to be submitted to arbitration. The Third Circuit also noted that the Supreme Court has repeatedly emphasized the “fundamental differences between classwide and individual arbitration,” which militate strongly in favor of judicial resolution of the issue of classwide arbitration.
The Third Circuit ruled that there is a presumption that “courts must decide questions of arbitrability unless the parties clearly and unmistakably provide otherwise,” an onerous burden that requires express, unambiguous language. Although earlier Third Circuit decisions had indicated that an arbitrator should decide whether a silent arbitration agreement permits class arbitration, the Opalinski panel characterized those earlier decisions as dicta.
This is an important decision for employers considering mandatory employment arbitration agreements, as well as those that already have them, since classwide employment claims are particularly ill-suited for an arbitration process. This opinion represents one more step in the continuing development of federal law endorsing agreements that require individual arbitration of claims.
Ballard Spahr’s Labor and Employment Group has substantial experience in designing employment arbitration programs and in compelling arbitration. The firm’s Consumer Financial Services Group pioneered the use of pre-dispute arbitration provisions in consumer financial services agreements. It is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws, and its skill in litigation defense and avoidance.
If you have any questions about arbitration agreements, please contact Steven W. Suflas at 856.761.3466 or firstname.lastname@example.org, Michelle M. McGeogh at 410.528.5661 or email@example.com, CFS Practice Leader Alan S. Kaplinsky at 215.864.8544 or firstname.lastname@example.org, Mark J. Levin at 215.864.8235 or email@example.com, Burt M. Rublin at 215.864.8116 or firstname.lastname@example.org, or the Ballard Spahr attorney with whom you work
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