It would have been easy to miss what at the Supreme Court earlier this week in a case about arbitration of employment disputes. But the justices’ unanimous decision in Morgan v. Sundance might have far-reaching implications for employers.
The facts of the case may be quickly stated. The plaintiff, an employee of a Taco Bell franchisee, filed a lawsuit challenging the company’s overtime practices. The defendant’s motion to dismiss was denied. Mediation was unsuccessful. Finally, after eight months, the company moved to put the litigation on hold because the employee’s contract required that such disputes be submitted to binding arbitration. The Supreme Court, by a vote of 9-0, held that by waiting so long, the company waived its right to enforce the arbitration clause.
Okay, fine: a fair caution to corporate defendants to make sure to raise the arbitration clause promptly, or risk losing its protection. But the Morgan case should be set against its context. These days, the clauses are ubiquitous — and under fire.
A consumer can’t buy a product or service online without agreeing to one. They’re increasingly common in employment contracts. And nowadays, cases involving arbitration clauses almost always arise from “adhesive” contracts, where the employee who wants the job or the consumer who wants the product has no choice to agree to terms written by the company. The mandatory arbitration clause may be buried deeply in the boilerplate that not even contracts professors read...
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