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U.S. High Court Rules Arbitration Clause Waived by Employer’s Delay in Opting to Enforce It

U.S. High Court Rules Arbitration Clause Waived by Employer’s Delay in Opting to Enforce It

Arbitration provisions in employment agreements require employees to have their disputes decided by private judges, usually of the employer’s own choosing, rather than go to court. Employers generally benefit from these clauses. But the U.S. Supreme Court has now ruled that an employer might waive its right to compel arbitration by not making a timely demand.

The case, Morgan v. Sundance, was brought by Robyn Morgan, who worked at a Taco Bell franchise owned by Sundance. Her job application contained a clause requiring her to submit any disputes to individual arbitration. The Supreme Court has upheld the validity of these clauses under the Federal Arbitration Act. But when Morgan filed a suit alleging that Sundance was violating federal wage-and-hour laws, Sundance waited eight months before demanding arbitration. During those months, the parties began litigation and had even gone as far as discussing settlement. Only after settlement talks failed did Sundance attempt to force the issue to arbitration.

The Eighth Circuit Court of Appeals ruled in favor of Sundance, stating that Morgan was not prejudiced as a result of the delay. The Supreme Court, however, said that Morgan was not required to demonstrate prejudice because arbitration contracts are treated the same as other types of contracts, and other breach of contract cases don’t require a showing of prejudice. Justice Elena Kagan wrote that “a court may not devise novel rules to favor arbitration over litigation.”

At Deutsch Atkins & Kleinfeldt, P.C. we welcome the Supreme Court’s decision in Morgan and the victory it represents for workers’ rights. As advocates for fair treatment of workers, we have seen firsthand how arbitration can be used to prevent employees from fully asserting their rights. We are pleased that under this new ruling, companies may not proceed with litigation, engage in settlement talks and then try to compel arbitration months later.

If you work in New Jersey or New York and believe your employer has underpaid you or has otherwise violated employment laws, reach out to our lawyers for help. You can call us at 551-245-8894 or contact us online to schedule a meeting at your convenience.

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Neil H. Deutsch
Retired

About Neil H. Deutsch has been practicing law for over 35 years and is known as a skilled negotiator in employment and discrimination law. He believes in a bottom-line approach of risk analysis and cost effectiveness for his clients. "Case evaluation is something we take seriously," says Mr. Deutsch who seeks top net dollar for…

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Bruce L. Atkins
Senior Partner

About Bruce L. Atkins is regarded as one of New Jersey’s premier practitioners of employment and civil litigation. He has been selected to the New Jersey Super Lawyers prestigious list every year since 2005.  This honor, bestowed upon a recipient by the votes of his peers, is a powerful nod to the skill Mr. Atkins…

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Adam J. Kleinfeldt
Partner

About Adam J. Kleinfeldt joined Deutsch Atkins & Kleinfeldt, P.C. in March of 2015.  He primarily represents individuals in employment litigations such as discrimination, retaliation, and whistle blowing matters.  He has extensive experience in all phases of the litigation process. Adam has obtained significant results for some of his clients, including a $525,000 jury verdict…

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Diane Englander Peyser
Attorney

About Diane Englander Peyser joined Deutsch Atkins & Kleinfeldt, P.C. in September 2018 where she represents employees in wrongful termination, retaliation, harassment, and discrimination matters. Prior to joining Deutsch Atkins & Kleinfeldt, P.C., Diane represented clients in all aspects of employment law on behalf of employees involving unemployment appeals, claims of sexual harassment, LGBT discrimination,…

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Debra M. McGarvey
Attorney

About Debra M. McGarvey joined Deutsch Atkins & Kleinfeldt, P.C. in December 2019. She has extensive experience defending employees and employers in state and federal court in employment litigation matters. She has represented clients on various issues arising out of the New Jersey Law Against Discrimination (NJLAD), the New Jersey Conscientious Employee Protection Act (CEPA),…

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