The U.S. Court of Appeals for the 2nd Circuit held on Nov. 18 that a private arbitrator in the case of Jock v. Sterling Jewelers Inc. had the power to define a class of plaintiffs to participate in the arbitration. While only 254 female plaintiff-employees asked to arbitrate their original claim for sex discrimination in pay and promotion, the arbitrator’s 2015 class certification increased the class size to about 44,000 women.
Those additional class members were female employees who had signed the arbitration agreement but had not joined the original claim’s 254 plaintiffs. According to plaintiffs’ counsel, the class will ultimately encompass about 70,000 female employees of the giant retail jewelry conglomerate, according to The Fashion Law.
The Sterling arbitration agreements
Arbitration is a type of private dispute resolution required in many employment agreements. In an arbitration proceeding, an individual arbitrator normally acts like a private judge, their decisions binding on the parties with narrow exception. This case involves interpretation of an arbitration agreement that Sterling forced its employees to sign as a condition of employment.
Sterling challenged the arbitrator’s authority to certify a class of employees beyond the original 254 plaintiffs. The 2nd Circuit disagreed, finding that the absent class members (those that were not original plaintiffs) had consented to the arbitrator’s power to define the class – that ultimately included them – when they originally signed the arbitration agreement.
The court agreed with the plaintiffs’ argument that the absent class members’ act of signing the agreement gave the arbitrator the power to decide issues related to class arbitration. Therefore, “if any of them initiated a … class proceeding, the arbitrator in that proceeding would be empowered to decide class-arbitrability … [including whether] to certify a class encompassing other employees’ claims.”
And that authority includes certifying a class that includes members who were not part of the original action, but whose earlier signing of the agreement consented to being included.
Seek legal advice concerning employment agreements
There are takeaways from this decision for employers and employees alike. Employers should work with attorneys who can carefully draft employment agreements that will do what they intend within legal limits. Employees are wise to have employment agreements reviewed by lawyers so that they understand what they are agreeing to and can negotiate terms, if appropriate.
(The 2nd Circuit opinion is available on Westlaw at 942 F.3d 617.)