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Tuesday, December 29, 2015

The Arbitration Trump Card

By: Thomas Eden

Amy Imburgia filed a class action lawsuit against DIRECTV, Inc. (DIRECTV), claiming it had improperly charged early termination fees to its customers. In 2011, the U.S. Supreme Court decided AT&T Mobility LLC v. Concepcion, in which the Court held that the Federal Arbitration Act (Act) preempted California precedent that had previously held that, in certain circumstances, arbitration clauses in customer agreements were unenforceable. Less than one month after that decision, DIRECTV moved to stay or dismiss the case and compel arbitration in Amy’s case under the Act.The California Court of Appeal refused to enforce the arbitration provision by holding that the language of the customer agreement subjected the arbitration clause to California law. DIRECTV appealed the case to the United States Supreme Court.

In the days leading up to Christmas the High Court found that the refusal to enforce the arbitration provision was preempted by the Federal Arbitration Act. Specifically, in DIRECTV v. Imburgia it concluded that California law “does not give due regard…to the federal policy favoring arbitration.” The High Court ordered the California Court to enforce the arbitration agreement on remand.

The decision also impacts employment arbitration agreements based upon the 2014, 11th Circuit Court of Appeals decision of Walthour v. Chipio Windshield Repair LLC. In that case Walthour filed a collective action claiming that Chipio had failed to pay minimum wage and overtime, in violation of the Fair Labor Standards Act (FLSA). After the Federal Court suit in Georgia was filed, Chipio moved to compel arbitration under the Federal Arbitration Act, citing the mandatory arbitration agreements Walthour had signed shortly after being hired. The District Court Judge compelled arbitration. His agreement stipulated that all employment disputes were to be resolved exclusively through individual arbitration, including class action rights. The 11th Circuit affirmed and the High Court refused to overturn the case.

Common Sense Counsel: The Imburgia case is truly a Christmas gift to employers who wish to engage in employment claims related risk reduction. Such an arbitration program can trump EEOC lawsuits, FLSA wage suits, retaliatory discharge claims - you name your worst employment nightmare. In light of this Supreme Court case law favoring alternatives to court litigation, consider options for designing an employee dispute resolution program and the potential business advantages - not the least of which is not having to spend a sunny day locked in a windowless room with a plaintiff’s attorney with an attitude. Plaintiff’s attorneys hate these programs for obvious reasons. The best programs have the following components: 1) an internal complaint process with a promise of no retaliation; 2) a toll free hot line for multiple location employers; 3) handbook provisions giving employee two channels to make their complaint and fair investigation process; 4) well drafted and broadly worded arbitration provision, covering class claims, that will pass court scrutiny; 5) training for all employees on the process; 6) private arbitration panel of former local judges, or AAA Arbitration, and mostly importantly; 7) a Human Resource professional with a listening ear and risk reduction mindset.


Tommy Eden is a partner working out of the Constangy, Brooks, Smith & Prophete, LLP offices in Opelika, AL and West Point, GA and a member of the ABA Section of Labor and Employment Law and serves on the Board of Directors for the East Alabama SHRM Chapter. He can be contacted at teden@constangy.com or 334-246-2901. Blog at www.alabamaatwork.com