Utilizing Arbitration Agreements Effectively

July 25, 2018 - Denny P. Major

Arbitration Agreement DocumentBy now, most, if not all, of you are familiar with the Supreme Court’s decision in Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018), which upheld the validity of waivers of FLSA collective actions in arbitration agreements.

The United States District Court for the District of South Carolina recently issued an order expanding on Epic Systems. Specifically, in Brumfield v. Kindred Healthcare Inc., C.A. No. 2:18-cv-00591-DCN (D.S.C. July 2, 2018), the District of South Carolina recently found that the arbitrator - rather than the court - had to decide whether an arbitration agreement was valid where the plaintiff was arguing she was not bound by the agreement. The Court considered arbitration agreements involving five different plaintiffs asserting FLSA claims. One of those plaintiffs, Brumfield, did not actually sign an arbitration agreement. Rather, her employer e-mailed her a notification of an arbitration agreement that informed her the agreement became binding if she continued her employment and chose not to opt out within 30 days. Brumfield argued that she was not made aware of the terms of the arbitration agreement. However, under the terms of the arbitration agreement, the arbitrator had the authority to decide whether the agreement is valid and enforceable. This is generally referred to as a “delegation provision.”

The District of South Carolina held that it had to defer to the delegation provision and, therefore, that Brumfield’s claim at least as to the validity of the arbitration clause had to be arbitrated (for this proposition, the Court relied on another Supreme Court opinion, Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (2010)). While it is recommended that employers have their employees actually sign arbitration agreements, the District Court’s order in Brumfield is another feather in the cap of employers as it relates to arbitration agreements, even with existing employees. Employers should strongly consider using these powerful tools for not only new hires, but also existing employees.

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