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What is it? Well, California (probably other states too, but this was a California law that had been settled law for years and years and years that was just overturned)... anyway, California has a rule that says if the fine print has an "unconscionable" clause it is ignored. This has historically meant that you can't fine print away your right to sue or have a class action suit.So AT&T Mobility offered "free" phones - but once you had it - they charged $30.00 for them. After getting the run-around from the company, there was a class action suit against them. So AT&T pointed to the fine print that says you can't sue. You have to go to arbitration that AT&T picks. You see, Class Action suits were designed for this very type of consumer protection. No one sues for $30.00... AT&T continues to lie to consumers (yes they admitted it was a lie), but if there is a class action suit, then AT&T changes toot suite.
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The Supreme Court (5 to 4) overturned the precedence, overruled the 9th Circuit, overruled state law and said, Hell No.
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In case you think I overstate, here is an HR News Blog that describes how this new rule can stop class action suits against employers now. Yay. Can you spell Oligarchy? (really - can you - because I can't..)
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Supreme Court Upholds Class Action Waiver in Arbitration Agreement
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The U.S. Supreme Court upheld the enforceability of class action waiver clause in arbitration agreements. While the case, AT&T Mobility LLC v. Concepcion, involved an arbitration agreement between a customer and a company, the ruling may be applied to employment contracts as well.
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In recent years, the U.S. Supreme Court decisions have tended to favor mandatory arbitration.
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In 2001, the Court held that the Federal Arbitration Act (FAA) governs arbitration agreements in the employment setting. Since then, arbitration agreements in the workplace have become increasingly common.
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A common challenge made to arbitration agreements is "unconscionability," which is generally defined as the absence of meaningful choice by one of the parties coupled with one-sided contract terms.
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Background of the Case
The Conceptions purchased a cell phone during a promotion that advertised them as “free.” They were charged roughly $30, the sales tax on the retail value of the phones.
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The Conceptions signed a contract with ATTM which contained a class action waiver provision. The contract required customers to arbitrate with the company directly.
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The Conceptions sued AT&T Mobility (ATTM), the phone service provider, claiming that the company had committed fraud by charging them for sales tax, when the phones were advertised as free. ATTM attempted to prevent the suit, arguing that under the provisions of the contract the customers had to arbitrate instead.
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What the Courts Said
The California district court ruled in favor of the Conceptions, ruling that the arbitration clause was unconscionable under California law, and that the FAA did not preempt California law.
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ATTM appealed to the Ninth Circuit Court of Appeals who agreed with the lower court’s ruling.
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The case was then reviewed by the Supreme Court who reversed the decision of the appeals court, ruling 5-4 in favor of ATTM.
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The Supreme Court found that that the California law on unconscionability, as applied to the prohibition on class action waivers in arbitration agreements, is preempted by the FAA.
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Furthermore, the Court ruled that states cannot require a procedure, such as class-wide arbitration, that is inconsistent with the FAA’ s goal to ensure enforcement of arbitration agreements to facilitate informal and streamlined proceedings. Class arbitration is slower, more formal, and increases the risks to defendants who may be subject to large damage awards without the same opportunity to appeal unfavorable results as are available in court actions.
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Tips for Employers
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First and foremost, employers should have an attorney experienced in employment law review arbitration agreements before they are signed by the parties.
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It’s also important for employers to effectively communicate their policy to workers. In additional to including the policy in employee handbook, employers should create a separate document containing the arbitration policy and be sure that each employee has signed and dated the agreement, acknowledging that they have received and understand it. Employees should also be provided with the full policy, not simply a notification that it exists or excerpts from it.