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Supreme Court Hears Arbitration Case, Accepts Affirmative Action Case

By Joanne Deschenaux  3/27/2013
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The U.S. Supreme Court, on March 25, 2013, weighed whether a party to a commercial arbitration agreement can be compelled to submit to class arbitration when the agreement does not authorize such proceedings. A ruling in that decision is expected by June 2013.

Also on March 25, the court agreed to decide in the 2013-14 term whether a state can constitutionally ban the use of race in public college admissions decisions.

Although neither case arises in an employment setting, both decisions will potentially have implications for the workplace.

Permissibility of Class Arbitration

Can an arbitrator interpret an arbitration agreement to allow for class arbitration? That was the question before the court when it heard oral arguments in Oxford Health Plans v. Sutter. The high court’s decision is likely to impact how many employment disputes are resolved in arbitration—as class actions or as individual claims.

Sutter involves an arbitration agreement in a commercial context between a doctor and an insurer that covers “all disputes” without any reference to class actions. The arbitrator interpreted the agreement to allow the case to proceed as a class action even though it was silent on that subject, and the lower federal courts refused to reverse the arbitrator. The Supreme Court will decide whether the arbitrator could interpret the agreement to allow for class arbitration or whether the dispute could only proceed as an individual claim.

The case is important to employers, according to attorney Richard Alfred, chair of Seyfarth Shaw LLP’s national wage and hour litigation practice, because the past 10 years have seen an explosion of class-action lawsuits by employees against employers. However, “class actions do not serve the interests of employers or employees—they are extremely costly for employers and take many years without resolution for employees,” he said.

Alfred noted that many employers have agreements with employees that all disputes will be resolved in arbitration on an individual basis, a procedure far less expensive and much faster than court litigation—similar to the way disputes are usually resolved under union contracts.

But he said lawyers representing employees have argued that even though their clients agreed to individual arbitration, they should still be allowed to litigate employment claims as class actions in arbitration if not in court.

The decision issued by the high court will apply to arbitration in the employment context as well as to commercial arbitration.

Use of Affirmative Action in Public University Admissions

Although the court has one affirmative action case pending—questioning the constitutionality of an admissions plan at the University of Texas that makes some use of race—it chose not to await the outcome of that action before deciding to hear another case next term.

At issue in Schuette v. Michigan Coalition to Defend Affirmative Action is the validity of Michigan’s Proposal 2, adopted by the state’s voters in 2006 by a 58 percent to 42 percent margin. The Michigan law bans preferential treatment toward any candidates in public university admissions. A federal appellate court struck down the law by an 8-7 vote.

The majority of the appeals court said the Equal Protection Clause of the 14th Amendment does more than guarantee equal treatment under the law. It also prevents laws from being passed that change the political process to impose extra burdens on minorities.

The case will be decided by only eight members of the Supreme Court because Justice Elena Kagan is not taking part.

In a friend-of-the-court brief filed in the Texas case, the Equal Employment Advisory Council (EEAC), a nonprofit association that provides guidance on equal employment and affirmative action compliance, discussed the significance for employers of universities’ use of affirmative action: “Any decision that prevents our nation’s public universities from utilizing race- or gender-conscious measures to attract, admit, educate and graduate diverse student bodies will have a direct, negative impact on the ability of federal contractors to satisfy their federally imposed affirmative action mandates,” the EEAC said. It “will pose significant hurdles for all employers seeking to derive a competitive business advantage by matching the diversity of their skilled workforces to the diversity of their customers and markets.”

The EEAC urged the Supreme Court “to be cognizant of these business needs and announce clear standards that allow colleges and universities some means of continuing to supply America’s business with qualified diverse candidates.”

Joanne Deschenaux, J.D., is SHRM’s senior legal editor.

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