Don’t wait too late to arbitrate, warns Supreme Court

The Federal Arbitration Act (FAA) favors the enforcement of arbitration agreements, but employers can’t wait too long to compel arbitration. Courts often apply a contract “waiver” rule if employers sit on their rights too long (meaning the court finds a party waived its right to arbitrate if it failed to start the process soon enough). But some courts were applying a special rule requiring an additional demonstration that one party suffered prejudice (or harm) when the other didn’t compel arbitration soon enough. But is a showing of prejudice really necessary? The U.S. Supreme Court says no.

Facts

When a fast-food franchise hired Robyn Morgan, she signed an agreement pledging to arbitrate any employment dispute. Later she filed a nationwide collective action arguing the employer had violated the Fair Labor Standards Act’s (FLSA) overtime rules. The parties engaged in litigation and attended an unsuccessful mediation.

Throughout the discussions, Morgan’s employer never mentioned the arbitration agreement. Almost eight months after the lawsuit was filed, the company finally asked the court to stay (or suspend) the litigation and compel arbitration under the FAA. Morgan argued the employer had waived the right to compel arbitration because it waited too long.