Rent-A-Center, West, Inc. v. Jackson
Headline: Arbitration enforceability clause upheld, blocking courts from deciding if employment arbitration agreements are unfair unless workers specifically challenge that delegation clause.
Holding: The Court held that when an arbitration agreement clearly assigns enforceability questions to an arbitrator and a worker challenges only the contract as a whole, the arbitrator must decide enforceability.
- Allows employers to enforce delegation clauses assigning enforceability questions to arbitrators.
- Requires plaintiffs to specifically challenge delegation clauses in court to keep arbitrability before judges.
- May limit court review of arbitration agreements in employment disputes.
Summary
Background
A former employee, Antonio Jackson, sued his employer, Rent-A-Center, for employment discrimination in federal court. Jackson had signed an arbitration agreement that required most employment disputes to go to arbitration. The agreement also said the arbitrator, not a court, would decide whether the agreement itself was enforceable. Jackson argued the whole arbitration agreement was unconscionable (legally unfair) under Nevada law. The District Court ordered arbitration; the Ninth Circuit said a court should decide unconscionability first and sent the case back.
Reasoning
The Supreme Court considered whether a court may decide unconscionability when the contract clearly assigns that question to an arbitrator. The majority explained that arbitration is a matter of contract and that a clause assigning threshold questions to an arbitrator is itself a separable agreement. Because Jackson did not specifically challenge that delegation clause below, the Court treated the delegation provision as valid and enforceable and held the arbitrator must decide enforceability. The Court reversed the Ninth Circuit.
Real world impact
The ruling means people who want a judge to decide whether an arbitration agreement is legally unfair must specifically and timely attack the very clause that assigns that question to an arbitrator. Many employment disputes with similar clauses will now send preliminary questions about the arbitration agreement to arbitrators rather than to courts. The Court also declined to consider a later argument Jackson raised about post-arbitration review because it was forfeited.
Dissents or concurrances
A dissent by Justice Stevens, joined by three Justices, argued the court should decide whether the arbitration agreement is valid when a person says they never meaningfully agreed to it because it was unfair.
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