Supreme Court says arbitration agreement can prohibit class actions

With class action lawsuits grabbing big headlines, employers may have a new option to protect themselves: requiring employees to sign arbitration agreements that prohibit class actions. The U.S. Supreme Court recently upheld an arbitration agreement between AT&T and its cell phone customers, where the agreement said that all disputes would be resolved through arbitration or small claims court. The agreement stated that customers were allowed only to bring their own individual complaints and could not participate in any class action against the company. Two customers from California filed a class action lawsuit after they were charged $30 in sales tax when they signed up for a “free” mobile phone from AT&T. The Court sided with the company, saying there weren’t any grounds to revoke the agreement under the Federal Arbitration Act, even taking into account the California Supreme Court’s historic suspicion of arbitration agreements (AT&T Mobility LLC v. Concepcion, US, April 2011).

Tips:  The Court’s decision appears to be broad enough to cover all types of pre-dispute arbitration agreements, including individual employment-related arbitration agreements. As class action lawsuits gain in popularity, it may be worth considering whether to require employees to sign arbitration agreements that prohibit class actions of any kind. For more information, see our Legal Guide, “Mandatory Arbitration Agreements” (1310).