The U.S. Supreme Court on Monday awarded a small but potentially significant victory to an Iowa fast-food worker.
The court did not address the basic premise of Robyn Morgan’s lawsuit – that the Taco Bell restaurant she worked for violated wage and hour laws. The court did, however, address a procedural issue that could have major implications for American workers whose employers insist on arbitration to settle disputes that would otherwise be heard in court.
Beginning around 2015, Morgan worked as an hourly employee for a Taco Bell restaurant in Osceola, which was owned by a franchise called Sundance. When applying for the job, Morgan signed an agreement to arbitrate any employment disputes.
In 2018, she filed a nationwide class action — a proceeding to litigate a multi-plaintiff pay dispute, similar in nature to a class action — against Sundance. She alleged the company violated federal overtime laws by moving some workers’ hours to other pay periods to prevent employees from being paid more than 40 hours in a week. given.
Sundance initially defended its actions in court, as if no arbitration agreement was in place. But after eight months of litigation, Sundance filed a motion to compel arbitration in the matter.
Morgan’s attorneys opposed the motion, arguing that Sundance waived its right to arbitrate by litigate for so long. A district court judge agreed and denied Sundance’s motion. The company appealed, and the United States Court of Appeals for the Eighth Circuit reversed the district court’s decision in a split decision.
The Court of Appeal ruled that a party only waived its right to arbitration if three criteria were met: the party knew of that right; then acted in a manner incompatible with this right; and then prejudiced the opposing party by these inconsistent actions.
This third element, requiring the opposing party to be aggrieved or disadvantaged, is not written into the statute, but nine circuits had previously found that the federal arbitration law demonstrates a “strong federal policy in favor of arbitration.” which requires such a showing of harm to prove that the right to arbitrate has been waived.
The Eight Circuit Court of Appeals was essentially saying that because Morgan had failed to show that its claim was injured or damaged by Sundance waiting so long to cite the arbitration agreement as a defense, Sundance had not waived its right to insist on arbitration.
The Supreme Court of the United States decided otherwise on Monday. Writing for the majority, Judge Elena Kagan said there was no requirement to show harm to prove that the right to arbitration had been waived.
Noting that “waivers” are understood to be actions aimed at “the intentional surrender or abandonment of a known right,” Kagan pointed out that in other contexts, courts have rarely considered the adverse effects of such actions on the opposing party.
“By requiring this kind of evidence before finding waiver of a right to arbitrate, the Eighth Circuit is applying a rule found nowhere else,” the opinion states. “The Federal Arbitration Act policy favoring arbitration does not authorize federal courts to invent special procedural rules favoring arbitration…The Federal policy is to treat arbitration contracts like any other, and not to promote arbitration.”
The effect of the court’s decision is that the Eighth Circuit Court of Appeals must address, once again, the question of whether Sundance knowingly waived its right to arbitrate the case.
This time, however, the court will only consider whether Sundance did so by acting inconsistently with that right, rather than whether it also harmed the plaintiff by acting inconsistently.
Morgan’s attorney, Karla Gilbride of the public interest law firm Public Justice, praises the court for his decision on Monday.
“We are pleased that the Supreme Court today announced unequivocally that the Federal Arbitration Act does not support procedural rules established by judges favoring arbitration over litigation or favoring settlement agreements. arbitration over other types of contracts,” the statement read.
“All Robyn Morgan wants in this case is to be paid fairly by her former employer and for her legal arguments to be dealt with fairly by the courts, without a thumb on the scales because those arguments involve arbitration. We hope the Today’s ruling will bring Ms Morgan closer to a fair outcome in her dispute with Sundance, and we also hope she will send a message to all companies that include arbitration clauses in their contracts with workers and consumers. .that these arbitration clauses will be treated like any other term in their contract – not worse, but not better either.
This story was published earlier by the Iowa Capital Dispatch, an affiliate of the nonprofit States Newsroom network, which includes the Florida Phoenix.