Supreme Court Ruling Strengthens Arbitration

Recent Supreme Court ruling Strengthens Use of Employee Arbitration Agreements

Supreme Court ruled yesterday in the case of Rent-A-Center, West, Inc. vs. Jackson, that where an arbitration agreement includes a provision that the arbitrator is to determine the enforceability of the agreement, any dispute to the enforceability of the agreement as a whole is for the arbitrator, not the courts.

An arbitration agreement between Rent-A-Center and its employee Antonio Jackson included claims of employment discrimination. The agreement stated that the arbitrator was to decide any dispute as to the “interpretation, relevancy, enforceability or structure of the Agreement, including but not limited to any claim that all or any part of the agreement is void or voidable.  “This is called a “delegation provision.”

Jackson filed suit for employment discrimination, but the trial court dismissed the lawsuit and ordered arbitration to decide whether the facts made the agreement unethical and unenforceable.   In a 5-4 decision, the Supreme Court disagreed with the Ninth Court of Appeals to reverse, reasoning that the trial court may decide challenges to the enforceability of the delegation provision itself, but not a challenge to the agreement as a whole.  Therefore, when there is a delegation provision in an arbitration agreement, any dispute to the enforceability of the agreement as a whole is for the arbitrator to decide.

Based on this decision, employers are encouraged to review their arbitration agreements, which contain similar language and update them if necessary to make sure that they include a detailed provision requiring all challenges as to the enforceability of the agreement to be decided by the arbitrator.