On May 23, 2022, the U.S. Supreme Court, in a unanimous decision, decided Morgan v. Sundance, Inc., No. 21-328, in favor of an employee who sued her employer, a Taco Bell franchisee, for wage theft. The Court concluded that waiving arbitration rights does not require a showing that the party seeking to have their case heard in federal court would be prejudiced by continuing with arbitration. The case, although decided on narrow grounds, demonstrates the risk that a party takes when it decides to delay enforcing a contractual arbitration provision. By eliminating the prejudice requirement, the Court removed a safety valve that saved parties who decided to forgo arbitration for a period of time, then ultimately opted for arbitration. As a result of the holding, a party seeking to invoke the right to arbitrate should not delay, or they will risk forfeiture of the right to arbitrate at a later time.
Plaintiff, Robyn Morgan and her employer, the franchisee, had an agreement to arbitrate any employment disputes. Morgan filed a nationwide collective action against the franchisee-defendant, instead of arbitration, when she sought to challenge the calculation of her overtime pay. Defendant filed a motion to stay the litigation and compel arbitration after eight months of litigation. The litigation included filing and arguing a motion to dismiss, filing an answer to the complaint, and participating in mediation.
In opposing the motion, plaintiff argued that defendant had waived its...
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