The post-oral-argument betting is that the Supreme Court will uphold California’s prohibition on class action waivers in arbitration agreements, in AT&T v. Concepcion — through some combination of conservative Justices concerned about protecting states’ rights and less conservative judges concerned about unconscionability.
So what would the world look like if the Court rules against AT&T? The arbitrability of a class action will be determined state by state. My home state of Massachusetts, as usual, was in the vanguard; a year ago the state’s highest court ruled in Feeney v. Dell that class action waivers could not be used in consumer arbitration clauses, similar to the California rule challenged in Concepcion. Now, in a case called Marchado v. NECCS Inc., a Massachusetts trial court judge has for the first time extended the Dell rule to hold that such waivers also are inappropriate in the employment context. Marchado specifically involved a franchise agreement, in which the plaintiff challenged independent contractor status, but it seems likely that the court would have ruled the same way if the argument had been made by an acknowledged employee.
Despite its increased appearance in recent years, mandatory arbitration in the employment context has never been an unalloyed benefit to employers. Even apart from litigation about the unconscionability or enforceability of such agreements, arbitration has its share of defects — it is not always less expensive than litigation, suffers from a lack of discovery, and there is no meaningful ability to appeal. In class cases in particular, our experience is that arbitrators also can be less sensitive to the prerequisites for class certification than a judge forced to make findings under Rule 23 or the state equivalent.
So if Massachusetts’ and California’s hostility to class action waivers is picked up by other states, that may not be entirely bad news for employers.