The Supreme Court ruled on April 24, 2019 that an arbitration agreement which is ambiguous as to whether the parties had agreed to class arbitration was insufficient to require a party to participate in class arbitration.

In the 2011 case Stolt-Nielsen S.A. v. Animal Feeds Int’l Corp., 559 U.S. 662 (2011) the Supreme Court decided that “silence” in an arbitration agreement regarding the issue of class arbitration meant that a party could not be compelled to engage in class arbitration.  In the more recent case of Lamps Plus, Inc. v. Varela, an employee had sought to compel his employer to arbitrate on a class basis claims arising out of the release of personal data belonging to its employees.

Supreme Court: Class Arbitration Requires Clear Consent by the Parties

The Ninth Circuit had held that ambiguity regarding the issue of class arbitration would be construed against the drafter of the arbitration agreement, in that case the employer, and ordered the employer arbitrate on a class basis.  But the Supreme Court reversed, noting, as it had in Stolt-Nielsen, that class arbitration is fundamentally different than arbitration directly between the parties as it sacrifices the informality and, therefore, the efficiency inherent in individual arbitration. The Supreme Court held, therefore, that a party to an arbitration agreement may be compelled to engage in class arbitration only when the parties have clearly consented to such class arbitration.

Employers Must Understand State Laws around Arbitration Agreements

Despite this favorable ruling, employers must still be cautious when drafting arbitration agreements.  Some states have recently limited the scope of arbitration agreements between employers and employees (particularly with respect to sexual harassment claims) and, at least until such statutes are themselves challenged in court, employers should be mindful of any such state limitations when rolling out arbitration agreements.