A case with significant implications affecting the enforcement of arbitration provisions in employment agreements is currently being weighed by the U.S. Supreme Court.

The United States Supreme Court recently held oral arguments in Rent-A-Center West, Inc. v. Jackson, No. 09-497 (U.S. argued April 26, 2010), a case on appeal from the United States Court of Appeals for the Ninth Circuit.  In Rent-A-Center, an employee signed an employment agreement requiring all disputes, including discrimination claims, to be resolved through arbitration.   The employee alleged a discrimination claim, and asserted that the arbitration provision contained in his employment agreement was unconscionable.  Nevertheless, the district court found that the arbitrator, not the court, had the exclusive authority to determine whether or not the arbitration provision was enforceable.

The Ninth Circuit reversed the lower court decision in part, holding that, although the enforceability of an arbitration provision in an employment agreement is usually a question for the arbitrator and not the court, the situation is different when a plaintiff claims the arbitration agreement or employment agreement is unconscionable.  If a plaintiff alleges that an arbitration provision is unconscionable, the Ninth Circuit held that the threashold question of unconscionablity must still be determined by the court.

It will be interesting to see how the U.S. Supreme Court comes down on this issue.  Although I usually discourage the use of arbitration provisions in commercial contracts, in some circumstances it makes sense to include arbitration clauses in employment agreements.  For example, it is easier to keep arbitration proceedings private (after all, what employer wants public press about it being sued by a former employee).  This decision could have a significant influence on the privacy afforded by arbitration provisions because a plaintiff could allege that the employment agreement is unconscionable and obtain a public hearing on the matter if the Supreme Court upholds the Ninth Circuit decision.