As our colleagues who litigate consumer class actions reported in last week’s client alert, the United States Supreme Court handed businesses a major victory last Wednesday, overturning California law to uphold a mandatory arbitration agreement that included a class action waiver. We take a more in-depth look at the decision with an eye toward what it means for employers.

In AT&T Mobility LLC v. Concepcion,1 the arbitration provision at issue was part of a two-year AT&T service contract, requiring California residents Mr. and Mrs. Concepcion to arbitrate any disputes with AT&T and prohibiting them from adjudicating their disputes as part of a class action—commonly referred to as a “class action waiver.”

The Concepcions challenged the arbitration agreement because of the class action waiver. The trial and appellate courts sided with the Concepcions and struck down the AT&T arbitration agreement based upon a rule established by the California Supreme Court in a 2005 case called Discover Bank v. Superior Court.2 The Discover Bank rule holds...