Today, the U.S. Supreme Court again tackled the thorny issue of arbitration in light of the Federal Arbitration Act and struck down a California rule that effectively invalidated arbitration agreements that prevented class actions. The case is AT&T Mobility v. Concepcion. Although the case is not an employment case, it has wide-reaching ramifications for a very wide array of arbitration agreements, including those between an employer and an employee.

In a nutshell, the Concepcions entered into a contract for mobile phone service with AT&T Mobile. The contract included a mandatory arbitration provision. That provision specified that arbitrations would be limited to the individual contract-holder, and could not proceed as a class action arbitration. When the Concepcions sued AT&T as part of a class action, AT&T moved to compel arbitration of single claims. The federal district court concluded that, while the Concepcions would have been better off in a single-plaintiff arbitral forum, a California rule rendered the arbitration agreement unenforceable because it foreclosed any possibility for the Concepcions to initiate an arbitration as a class action. The Ninth Circuit Court of Appeals agreed. Both courts applied the “Discover Bank” rule, which was created by California courts, and which effectively nullified arbitration agreements that prevent class-wide arbitration claims. In a 5-4 decision, the Supreme Court held that California’s “Discover Bank” rule ran afoul of the Federal Arbitration Act, which generally requires courts to enforce arbitration agreements unless they are unenforceable as a matter of contract law.

The Concepcion case arguably provides a new arrow in an employer’s defense quiver. The case should encourage employers who fear employment-related class actions (which really should be most employers) to adopt contractual arbitration policies that specifically prohibit class action claims within an arbitration. This holding should dramatically limit an employer’s exposure with respect to big-ticket employment litigation. The Concepcion case is not a panacea, however, because courts and legislatures may still try to carve out of the arbitration realm certain types of claims on public policy grounds, although that will be a stretch in light of the broad holding in Concepcion.

I blog today simply to make an observation: In Concepcion the U.S. Supreme Court has again made clear, unequivocally, that it is our federal policy to strongly favor the recognition and enforcement of arbitration agreements. According to Justice Scalia and the majority opinion in Concepcion, federal and state courts, and state legislatures may not fashion rules or interpretations that single out arbitration agreements for more harsh review than other forms of contracts. Why? Because the Federal Arbitration Act specifically prohibits such rules and because private arbitration remains a highly valued method of dispute resolution that more often than not promises speedier and more cost-effective dispute resolution than resort to the courts.

Time and time again we find ourselves trying to enforce arbitration agreements in courts, only to find ourselves on the defensive. While Congress enacted the Federal Arbitration Act in 1925 to quash judicial hostility toward arbitration, that hostility continues in many courts even today. There is almost a presumption in some courts that arbitration is litigation’s evil twin. But our Supreme Court has ruled repeatedly that the Federal Arbitration Act embodies a “national policy favoring arbitration”, and that national policy should guide courts when faced with an arbitration agreement. Those seeking to enforce arbitration agreements are backed by a strong national policy favoring private dispute resolution, and one has to wonder how many times the Supreme Court needs to reiterate this axiom before it resonates with all.