Details, Details, Details
Since the Steelworkers Trilogy of 1960, the Supreme Court has furthered the private justice system by liberally interpreting the scope of arbitration agreements. The Third Circuit, in a case applying New Jersey law, however, may have recently narrowed the scope of those decisions within its jurisdiction. In Moon v. Breathless, Inc., the Circuit had to determine whether a statutory claim was covered by an arbitration agreement or could be brought in court. The individual bringing the claim had signed an independent contractor agreement which contained a standard arbitration clause covering all disputes arising under the agreement. Nevertheless, the individual wanted to bring in court a statutory (FLSA) claim based on their asserted employee status. The Circuit was called upon to determine whether, under the breadth of the arbitration clause, the statutory claim, which on its face was inconsistent with the independent contractor agreement, could be brought in court or must be resolved in arbitration.
To answer this question, the Circuit looked to the wording of the arbitration clause. The clause at issue referenced only disputes arising under the agreement and further acknowledged that such matters could not be subject to court litigation. The arbitration clause, however, did not identify the general substantive area that the clause covered. Nor did the arbitration clause make any reference to statutory claims. Rather, it spoke only of claims arising under of the agreement.
Such language is not uncommon in arbitration clauses, as they have been broadly interpreted to include all claims of any nature which arguably involve the agreement. Nevertheless, the Circuit held that to include a statutory claim within the scope of the arbitration agreement, the agreement must generally identify the subject area which the clause covers, i.e. work/services provided, and, more importantly, make at least a general reference to the inclusion of statutory claims. This is particularly true if the arbitration clause is written in the traditional way of referring to disputes arising under the agreement, as such language would be viewed as limiting the scope of the arbitration clause to the exclusion of statutory claims.
In light of this decision, at least within the Third Circuit (Pennsylvania, Delaware, New Jersey, and the Virgin Islands), employers are well-advised to broadly define the scope of the matters that are required to be arbitrated. This would include any aspect of the parties’ relationship, since an employer would not want to use the term “employment” with an alleged non-employee. Additionally, the arbitration clause should make a specific reference to the inclusion of any alleged statutory violations.