Enforceability of Class Action Waiver in Arbitration Agreement Must Be Decided by Arbitrator

Vilches v. The Travelers Companies, Inc., 2011 WL 453304 (3d Cir., February 9, 2011) – The Third Circuit Court of Appeals has ruled that an arbitrator, not the court, must decide whether a revised arbitration agreement prohibiting class action arbitrations is enforceable. In this case, the plaintiffs agreed upon employment that all disputes would be resolved by arbitration, and that the employer could revise the arbitration policy at any time. The employer later revised the policy to prohibit arbitration of class or collective actions. The plaintiffs subsequently filed a class and collective action to recover unpaid wages and overtime, arguing that the revised policy did not bind them, and in any event was unconscionable. In keeping with prior authority in New Jersey, the court remanded the issue to the arbitrator, ruling that questions of contract interpretation aimed at determining whether a particular procedural mechanism is authorized by a given arbitration agreement are for the arbitrator to decide. The court did, however, address the unconscionability issue, finding that the revised provision was proper because it was not a contract of adhesion.