U.S. Supreme Court: unconscionability challenge to be determined by arbitrator, not court

By natalie • Jul 28th, 2010 • Category: Arbitration, Arbitration NewsPrint This Post Print This Post
For those employers using arbitration agreements, the United States Supreme Court recently issued an interesting decision regarding who should determine the threshold issue of whether an arbitration agreement is enforceable. In Rent-A-Center West v. Jackson, Antonio Jackson sued Rent-A-Center (”RAC”) for employment discrimination, and RAC petitioned the court to compel Jackson to arbitrate his claims. Jackson opposed the petition on the grounds his arbitration agreement was unconscionable. Pursuant to a provision expressly delegating enforceability challenges to the arbitrator, RAC asserted the arbitrator and not the court should determine the issue.

The United States Supreme Court recognized that Jackson’s arbitration agreement required him to arbitrate his claims and delegated to the arbitrator exclusive authority to resolve challenges to the agreement’s enforceability. The Court held that, where an employee challenges the validity of the specific provision the employer seeks to enforce, such questions remain the province of courts. In contrast, where an employee challenges the validity of the entire arbitration agreement (”as a whole”), the dispute remains subject to any delegation provision and must be decided by the arbitrator. Here, because Jackson challenged the arbitration agreement generally (and not the delegation provision specifically) as unconscionable, the issue of enforceability fell within the arbitrator’s exclusive authority to resolve.

Employers using arbitration agreements would be well advised to review such agreements and consider revisions, if necessary, to take advantage of the Court’s recognition that, in appropriate circumstances, delegation provisions are enforceable.

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