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Legal Arbitration in Light of NLRB and AT&T

Thursday, January, 19, 2012

If you have been following the developments in how the Federal Arbitration Act relates to the legal arbitration of consumer and employee contracts, you may have seen a flip-flopping sense of how this applies. Two cases in point are AT&T Mobile v. Concepcion, and the National Labor Relation Board's decision in D. R. Horton, Inc. v. Michael Cuda. In the first case, a class action arbitration waiver was upheld, and in the latter, it was overturned. This can seem confusing at first glance.


Differences in Consumer and Employment Contract Arbitration


The first distinction that needs to be made between these cases is that AT&T Mobile v. Concepcion was a consumer contract arbitration case and D. R. Horton, Inc. v. Michael Cuda was an employment dispute. The nature of these contracts differ in more ways than customer service agreements versus employment agreements. The nature of the Terms and Conditions in either case touch on separate issues, and the question of whether an arbitration waiver is “unconscionable” has different implications in either case.


As an illustration, what are the primary differences between buying a consumer product and applying for employment? To start with, given the competitive nature of consumer goods providers, a customer is perfectly free to take or leave a service contract that they do not find agreeable. When it comes to employment contracts, especially during the current economy, an applicant could feel more pressured to accept an arbitration clause, even one that waives the right to class action. In the first case, the waiver is less likely to be seen as “unconscionable,” whereas in the second case, it is more likely to be viewed as coercive, and “unconscionable” in that light.


The Future of Class Action Arbitration


Neither case is an overall defining moment in the legal arbitration of contracts. Customer contracts are distinct in nature from employment contracts, are regulated by different government bodies, and should be considered differently. Further, there is always the possibility that a defining decision can be made invalid. What the relationship between AT&T v. Concepcion and the NLRB's ruling proves is that arbitration is a dynamic process, and precedent is no guarantee of victory.