U.S. Supreme Court cracks down on late arbitration demands

Does your company require employees to sign agreements to arbitrate any disputes arising from their employment contracts? Then a recent U.S. Supreme Court case serves as a cautionary tale for those of you looking to enforce agreements. The lesson is to demand arbitration as early as possible or else risk waiving the right if you try to do so later down the road.

Facts

The U.S. Supreme Court recently weighed in on the correct test to apply when deciding whether a party has waived the right to arbitrate. In the case, Robyn Morgan was an hourly employee at a Taco Bell owned by Sundance, Inc. She later filed a nationwide collective action suit against the company alleging wage and hour violations.

In the employment contract, Morgan signed an agreement to arbitrate any employment disputes. Sundance, Inc., nevertheless litigated the case in federal court for several months, making requests to dismiss, answering the complaint, and attending mediation before ultimately asking the court to compel arbitration under the Federal Arbitration Act (FAA). The issue for the Supreme Court was whether the employer had waived the right to arbitrate the matter.

8th Circuit’s ruling