Less than two years ago, the United States Supreme Court limited the availability of arbitrations in class action cases when it decided that a party may not be compelled under the Federal Arbitration Act to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so. Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S.Ct. 1758 (2010). Two weeks ago, in a case featuring Twin Cities FLSA heavyweights Nichols, Kaster and Dorsey and Whitney, U.S. District Court Chief Judge Michael Davis (D. Minn.) has added some nuance to that general rule in his decision in Mork v. Loram Maintenance of Way, Inc., (No. 11-2069, January 9, 2012).
The issue before Judge Davis was slightly different than the one considered by the Supreme Court. Here, the question was whether an agreement between an employee and his employer requiring arbitration would permit the employee to pursue his wage and hour claims on a collective basis. Because the agreement did not address the issue directly, the Court relied on two standard rules of contract interpretation. First, the Court must give effect to the contractual rights and expectations of the parties, and not impose a particular type of arbitration based on its own policy judgments. Second, any ambiguities in the agreement must be construed against the drafter (i.e. the employer).
With these precepts in mind, Judge Davis described his task as determining whether the Arbitration Agreement between Mork and his employer Loram “evinces sufficient indicia of agreement between the parties that a claim within its scope may proceed on a collective basis.” Based on some broad language in that agreement, as well as the need to interpret ambiguities against Loram, the Court ultimately concluded that Mork would be allowed to pursue his claim as part of a collective action.
The lesson here for employers is pretty straightforward: if you would prefer not to have collective actions or class actions brought in an arbitration setting, make sure that your agreement specifically says just that!