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The Potential Impact of Today's Supreme Court's 5-4 Decision on Arbitrability

By Michael W. Fox, Esq.

It is never too much a surprise when the Supreme Court reverses the 9th Circuit, nor in recent years is it a surprise when the Court hands down a decision favoring arbitration of disputes, even in employment law matters. In a narrow sense, that is the substance of  today's 5-4 decision in Rent-A-Center, West, Inc. v. Jackson, (S.Ct. 6/21/10) [pdf].

The dispute was a procedural one, who has the power to determine the initial question of arbitrability in a particular set of circumstances, the court or the arbitrator.  In one sense, all the Supreme Court did was lay down the guideline for how the challenge should be made if the party wishes the Court to be the interpreter.  If that were the only consequence, it would be an important case for practitioners dealing with these issues, but at least the applicable law would be more clear and parties could make their arguments accordingly.

If that is the only result of today's ruling, then at least to me, this will ultimately be a rather inconsequential decision. In the short term, this employer will have won a victory (although not on the merits of the case) and parties will adapt their positions going forward to comply with the holding.

However, rather than being another good day for employers in the Supreme Court, which is much rarer than most believe, it is quite possible that employers may rue the day that Justice Kennedy cast his lot with Justices Scalia (the author of the opinion), Thomas, Roberts and Alito on this case.

I can almost guarantee, in fact it may very well occur before I finish drafting this post, that there will be a hue and outcry by Senator Leahy and others that the Supreme Court has dealt yet another vicious and erroneous blow to employee rights and that the only recourse is swift and sure Congressional action.  (If that occurs, I think most objective commentators will agree that it a tremendous overstatement of what really happened today.)

The problem for employers is that the swift and sure Congressional action if it should come, is unlikely to merely undo Rent-A-Center.  It is much more likely to be the enactment of the Arbitration Fairness Act, which notwithstanding what you may hear, will be the end of arbitration as a means of dispute resolution in the employment setting except for collective bargaining agreements.

I am not sure what term one uses to describe something that is far worse than a mere pyrrhic victory, but if  the result of today's decision is the passage of the Arbitration Fairness Act , then the employer community will certainly need one.

Update: The first linkage (at least that I have seen to the AFA):

Public Citizen's Gupta noted that the House Judiciary Committee on June 23 is scheduled to consider the proposed Arbitration Fairness Act. "The timing is interesting," he said, adding, "The Court and Congress are moving in very different directions. I think this decision will help provoke a legislative response. It really is an attempt by the Court to take away the last safety valve available to consumers and employees."

from a National Law Journal article discussing today's decision.

Full post as published by Jottings By An Employer's Lawyer on June 21, 2010 (boomark / email).