August 14, 2012 Articles

AT&T v. Concepcion's Effect on Employment Agreements

By Olivia St. Clair

The Federal Arbitration Act of 1925 (FAA), 9 U.S.C. ยง 1 et seq., provides that arbitration agreements are "valid, irrevocable and enforceable" and entitled to the same respect as other contracts. Despite this, the California Supreme Court struck down an arbitration clause in a consumer agreement because the arbitration clause did not permit the consumer to bring a class arbitration. The U.S. Supreme Court reversed. The Supreme Court held that California law requiring that class actions be available in consumer cases discriminated against arbitration. The Court reasoned that arbitration is consent-based and generally ill-suited to class actions. It stated that California's imposition of a class-action requirement on arbitration sacrificed arbitration's informality and made it slower, more complicated, and more expensive. Requiring arbitration to permit class actions also made arbitration less attractive as a dispute-resolution mechanism because it raised the stakes. For these and other reasons, the Supreme Court held that California state law was inconsistent with the goals of the FAA and preempted by it. AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1747 (2011).

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