Third Circuit Holds that Courts, Not Arbitrators, Should Rule on Classwide Arbitration

In Opalinski v. Robert Half International, Inc., the United States Court of Appeals for the Third Circuit held that where an arbitration clause is silent as to the availability of classwide arbitration, that issue should presumptively be decided by a court, not an arbitrator, unless the agreement specifically reserves that decision to the arbitrator.

Two former employees of Robert Half International, Inc., sued it on behalf of themselves and other coworkers, alleging that they were not paid overtime in violation of the Fair Labor Standards Act. The plaintiffs both signed employment agreements containing arbitration provisions that were silent on classwide arbitration.

Robert Half moved to compel individual arbitration of the employees’ claims. In October 2011, the U.S. District Court compelled arbitration and held that the arbitrator should decide whether classwide arbitration was available. The arbitrator ultimately issued an initial partial award and ruled that the employment agreements permitted classwide arbitration. The employer asked that the District Court vacate the partial award, but that request was denied.

Robert Half appealed the denial of its motion and asserted that the availability of classwide arbitration should have been decided by the court, rather than the arbitrator. The Third Circuit agreed.

Noting that the U.S. Supreme Court has yet to conclusively decide the issue, the Third Circuit agreed with a Sixth Circuit decision rendered last year holding that the availability of classwide arbitration is a “question of arbitrability,” which is a “gateway” issue for a court to decide. The Third Circuit reasoned that the availability of classwide arbitration implicates whose claims the arbitrator may resolve and the type of controversy to be submitted to arbitration. The Third Circuit also noted that the Supreme Court has repeatedly emphasized the “fundamental differences between classwide and individual arbitration,” which militate strongly in favor of judicial resolution of the issue of classwide arbitration. 

The Third Circuit ruled that there is a presumption that “courts must decide questions of arbitrability unless the parties clearly and unmistakably provide otherwise,” an onerous burden that requires express, unambiguous language. Although earlier Third Circuit decisions had indicated that an arbitrator should decide whether a silent arbitration agreement permits class arbitration, the Opalinski panel characterized those earlier decisions as dicta.

This is an important decision for employers considering mandatory employment arbitration agreements, as well as those that already have them, since classwide employment claims are particularly ill-suited for an arbitration process. This opinion represents one more step in the continuing development of federal law endorsing agreements that require individual arbitration of claims. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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