The Supreme Court ruled unanimously against a Taco Bell franchise operator on May 23, finding that a federal appeals court exceeded its authority in fashioning an arbitration-related rule in a fast-food employee’s class-action lawsuit over overtime pay.
The lawsuit went forward in federal court, but the company involved waited almost eight months before invoking the arbitration clause in its standard form employment contract.
The respondent, Sundance Inc., owns more than 150 Taco Bell franchises throughout the country. The petitioner, Robyn Morgan, worked at one of those franchises in Osceola, Iowa, as an hourly employee for three months in 2015.
Morgan was upset by Sundance’s policy of “shifting” hours that employees worked in one week and recording them for the following week, so that the total number of recorded hours in any given week would never exceed 40, at which time overtime pay rates were supposed to kick in.
Morgan and other crew members also sometimes were instructed to clock out and continue working off the clock, a practice that the petitioner alleges violates the federal Fair Labor Standards Act (FLSA). She initiated a nationwide collective action under FLSA on behalf of all similarly situated hourly employees of Sundance franchises.
The new Supreme Court decision reverses a ruling by the U.S. Court of Appeals for the 8th Circuit, which found that Sundance didn’t give up its right to compel arbitration by waiting too long to pursue it. The Supreme Court vacated the 8th Circuit ruling and remanded the case “for further proceedings consistent with this opinion.”
The specific issue was whether a party forfeits its right to insist on arbitration by not calling for it early in the legal process.
“To decide whether a waiver has occurred, the court focuses on the actions of the person who held the right; the court seldom considers the effects of those actions on the opposing party,” Kagan wrote in the Supreme Court opinion.
“That analysis applies to the waiver of a contractual right, as of any other.
“So in demanding that kind of proof before finding the waiver of an arbitration right, the Eighth Circuit applies a rule found nowhere else—consider it a bespoke rule of waiver for arbitration.”
Even though the Federal Arbitration Act favors arbitration, it “does not authorize federal courts to invent special, arbitration-preferring procedural rules.”
A court “must hold a party to its arbitration contract just as the court would to any other kind. But a court may not devise novel rules to favor arbitration over litigation,” Kagan wrote.
Morgan’s attorney, Karla Ann Gilbride of Public Justice, P.C., hailed the Supreme Court’s ruling.
“We are pleased that the Supreme Court announced today in no uncertain terms that the Federal Arbitration Act does not support judge-made procedural rules favoring arbitration over litigation or favoring arbitration agreements over other types of contracts,” Gilbride told The Epoch Times in an emailed statement.
“All Robyn Morgan wants in this case is to be paid fairly by her former employer and to have her legal arguments treated fairly by the courts, without a thumb on the scale because those arguments happen to involve arbitration.
“We are hopeful that today’s decision will bring Ms. Morgan a step closer to a fair result in her dispute with Sundance, and we’re also hopeful that it will send a message to all corporations who include arbitration provisions in their contracts with workers and consumers that those arbitration provisions will be treated just like any other term in their contract—no worse, but also no better.”
Attorneys for Sundance Inc. didn’t respond by press time to a request by The Epoch Times for comment.
