Lamps Plus, Inc. v Varella

Recently, the U.S. Supreme Court issued a decision in Lamps Plus, Inc. v. Varela, holding that individual arbitration is the default rule for ambiguous agreements.

In the case, Mr. Varela, an employee, filed a class action lawsuit against his employer, Lamps Plus, in federal court. Lamps Plus, relying on its standard employee arbitration agreement, sought to compel arbitration. The arbitration agreement was ambiguous as to whether an arbitration could be filed as a class action, rather than as an individual action. The lower court, thus, compelled Lamps Plus to arbitrate the claim as a class action.

Supreme Court Reversal

The Supreme Court reversed the lower court. In other words, each employee would have to bring an arbitration claim individually, rather than as a group. The Court reasoned that “Arbitration is strictly a matter of consent.” Lamps Plus, Inc. v. Varella, Docket No. 17-988, at p.7 (April 24, 2019). Therefore, a court cannot infer class action arbitration into an agreement unless there is a “contractual basis for concluding that the party agreed to do so.” Id. at p 8.

If an arbitration agreement is ambiguous or silent as to class actions, then individual arbitration is the default rule. The employer could have avoided this situation entirely if they had consulted with a skilled employment law attorney for a contract review, despite winning the case. When is the last time you had an attorney review your employment contracts?