Enforceable arbitration agreements have long served as a valuable tool for California employers grappling with wage and hour claims. Their significance has been further underscored by the recent addition of section 801.1 to the California Evidence Code, making it more challenging for employers to introduce expert witness testimony concerning emotional distress damages during trials. This development has heightened the appeal of steering non-wage and hour employment lawsuits towards arbitration.
Amid ongoing efforts by the plaintiffs’ bar to challenge the enforceability of arbitration agreements across various employment cases, a fresh legal conundrum has emerged. The key question in this conundrum revolved around whether trial courts possess the authority to dismiss a case once it’s referred to arbitration through a motion or stipulation, or must they instead order a stay, pending the outcome of arbitration? This issue has engendered a schism among the circuit courts, with four circuits granting courts the discretion for dismissal, while the remaining six circuits mandate stays.
The Supreme Court is expected to issue its decision on this matter within the next year, following their decision to take on the IntelliQuick Delivery Inc. case. In the case, the legal dispute involves delivery drivers employed by IntelliQuick Delivery Inc., a logistics company. These drivers filed claims alleging misclassification by their employer, contending that they were erroneously categorized as independent contractors under federal and Arizona law. The drivers, however, were bound by arbitration agreements, and both parties concurred on arbitration as the course of action. However, a divergence emerged regarding whether the district court could opt to dismiss the case or simply stay it. The District Court aligned with the employer, IntelliQuick, asserting that dismissal was the appropriate path, a determination upheld by the Ninth Circuit.
In response to these disparities, the drivers petitioned the Supreme Court for certiorari in June 2023, arguing that, “Petitioners would have prevailed had this dispute been filed in any of these six circuits, but instead lost because the action arose in the Ninth Circuit.” They contended that this incongruity impedes the equitable and just administration of a nationwide framework that governs hundreds of cases annually, and that this discord will not naturally resolve itself.
The Supreme Court’s resolution of this issue is not anticipated until at least 2025, but it will undeniably command close attention from labor and employment attorneys as it holds the potential to significantly influence the handling of arbitration stays in wage-and-hour cases. Currently, the Second, Third, Sixth, Seventh, Tenth, and Eleventh Circuits require stays in such situations, while the First, Fifth, Eighth, and Ninth Circuits interpret the Federal Arbitration Act as granting district courts the discretion to dismiss such cases.