Outsourcing Justice

Third Circuit Invalidates Employment Arbitration Clause

The Third Circuit recently struck down an arbitration clause in the employment setting, finding that the employees at issue did not explicitly agree to arbitrate.   See Scott v. Education Management Corporation, No. 15-2177 (3d Cir. Oct. 18, 2016) (click here for a copy of the decision).  Applying Pennsylvania law, which required a “clear and unmistakable” agreement to arbitrate, the Third Circuit found that there was no valid agreement based on the employees’ continued employment because the employees raised objections when the employer implemented its ADR policy.

I find this case notable because of the “heightened clarity” rule applied by the Third Circuit.  This case reminds me of the New Jersey Supreme Court’s decision in Atalese v. United States Legal Services Group (N.J. 2014), holding that an arbitration agreement must be written in clear and unambiguous language.  Although I like the results and law of both Atalese and the Third Circuit’s recent Scott decision because these decisions seem to impose heightened disclosure requirements for arbitration clauses, these decisions appear to be in tension with the Supreme Court’s ruling in Concepcion.  The Third Circuit’s recent opinion seemed to acknowledge this potential tension with Concepcion when the Third Circuit briefly remarked in its opinion that the employer at issue “has not suggested that this rule of heightened clarity [for arbitration agreements under Pennsylvania law] unfairly targets arbitration clauses for invalidation.”

I strongly suspect the employer in Scott will file a cert petition or seek en banc review based on the broad preemption arguments recognized in Concepcion.   Concepcion is widely recognized as a case dealing with class actions, and parties and courts routinely cite Concepcion for the principle that class action waivers are valid.  However, Concepcion’s broad preemption language goes beyond the class action context, and some courts have been using Concepcion to override state law arguments or defenses having nothing to do with class action procedures.

 

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