Does your company have employees that sign agreements to arbitrate any disputes arising from their employment contracts? Then a recent U.S. Supreme Court case serves as a cautionary tale for companies looking to enforce these arbitration agreements. The lesson is to demand arbitration as early as possible or else you risk waiving the right if you make a motion to compel arbitration later down the road.
On May 23, 2022, the United States Supreme Court decided Morgan v. Sundance, Inc., which concerned the correct test to apply when deciding whether a party has waived the right to arbitrate. In this case, Plaintiff was an hourly employee at a Taco Bell owned by Sundance. He later filed a nationwide collective action suit against Sundance, alleging wage and hour violations. In Plaintiff’s employment contract, he signed an agreement to arbitrate any employment disputes. However, the Defendant litigated the case in federal court for several months making motions to dismiss, answering the complaint, and attending mediation, before ultimately making a motion to compel arbitration under the Federal Arbitration Act (“FAA”). The issue for the Court was whether the Defendant had waived their right to arbitrate the matter.