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FMG Law Blog Line

Supreme Court Issues Three Important Decisions

Posted on: July 1st, 2010

By Mary Anne Ackourey & Jonathan Kandel

The United States Supreme Court has recently issued three much anticipated decisions. The first case, Rent-A-Center, West, Inc. v. Jackson, allows parties to limit a federal court’s role in determining whether an arbitration agreement is enforceable. The second case, City of Ontario, California v. Quon, is the first time the Court has addressed employee privacy rights in electronic communications. The third case, New Process Steel, L.P. v. National Labor Relations Board, leaves uncertain the results of all cases decided by the National Labor Relations Board (NLRB) between January 1, 2008 and March 2010.

Jackson and Arbitration Agreements

In Jackson, a 5-4 divided Court held that an arbitration agreement can delegate “gateway questions of arbitrability” to an arbitrator, rather than a court. Under the Federal Arbitration Act a federal court must order the parties to arbitration if there is a valid and enforceable arbitration agreement. In Jackson, the plaintiff filed an employment discrimination suit against his former employer. The employer filed a motion to dismiss based on an arbitration agreement signed by the plaintiff. The plaintiff opposed the motion, arguing that the agreement was unenforceable. The agreement contained a provision providing that the arbitrator would have exclusive authority to resolve any dispute relating to interpretation, applicability, enforceability, or formation of the agreement.

The Supreme Court concluded that the last provision was merely “an additional, antecedent agreement” delegating threshold issues of enforceability to an arbitrator, which was enforceable. Notably, the plaintiff challenged the enforceability of the entire arbitration agreement, not specifically the “delegation provision.” The Court explained that a federal court will only intervene if the basis of the challenge is “directed specifically to the agreement to arbitrate.”

After Jackson, all arbitration agreements should be reviewed to determine whether a “delegation provision” is appropriate. While a “delegation provision” may not be appropriate for every company, it can strengthen the role of an arbitrator in resolving disputes.

Quon and Employee Electronic Communications

In Quon, the Court concluded that a City did not violate its employees’ privacy rights when it reviewed text messages sent on City-issued devices. In Quon, the City of Ontario, California issued text messaging devices to members of the SWAT Team. Upon issuing the devices, the City reminded the officers that, pursuant to the City’s Computer Policy, text messages could be audited (and reviewed) just like emails. As part of the audit, the City reviewed all messages sent by officers that exceeded their message limit. Because the purpose of the audit was to determine whether the City needed additional messages, only texts sent while the officers were on duty were reviewed.

Initially, the Court refused to address whether the officers had a reasonable expectation of privacy in the text messages sent on City-issued devices. The Court explained that the “[r]apid changes” in technology and communications require caution to avoid “far-reaching,” unpredictable implications. However, the Court reiterated that “employer policies concerning communications will of course shape the reasonable expectations of employees, especially to the extent such policies are clearly communicated.”

The Court determined that the search was reasonable given that it was “justified at its inception” and was not “excessively intrusive.” The Court found the audit was justified because it was ordered for a “work-related purpose,” determining whether the City needed to increase its message limit. Additionally, the Court emphasized that the City reduced the intrusiveness of the audit by only reviewing the messages sent while the officers were on duty.

The Quon decision provides a reminder that a “clearly communicated” policy may provide employers latitude to monitor their employees’ electronic communications.

New Process and The National Labor Relations Board

In New Process, the Court concluded that the NLRB did not have authority to issue decisions from January 1, 2008, through March 2010, when the Board had only two of its five positions filled.

At the end of December 2007, the NLRB was left with only two members (one democrat appointed and one republican appointed). The two-member Board proceeded to issue almost 600 decisions during the next 27 months. In more than 70 of those cases the losing party appealed the decision to a Federal Court of Appeals, arguing that the two-member board did not have authority to issue decisions.

The Court’s decision leaves almost 600 decisions issued by the two-member board with uncertainty. Now that the NLRB has four members, it is unclear how it will handle the previously decided cases.

For more information, contact Ms. Ackourey at [email protected] or Mr. Kandel at[email protected].

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