Labor and Commercial Arbitration: The Court’s Misguided Merger

In the 2011 case, in AT&T Mobility LLC v. Concepcion, the U.S. Supreme Court held that the Federal Arbitration Act (FAA) preempts state contract laws that interfere with the goals of the Act, including the defense that an arbitration agreement is unconscionable. This decision was hardly surprising despite its significant effect on consumers and employees. Since the 1980s the Court has continually expanded the FAA, the statute governing commercial arbitration. The Court has justified this expansion by comparing the FAA to section 301 of the Labor Management Relations Act, a comparable statute requiring courts to defer to labor arbitration where parties agree to arbitrate their disputes. Yet, labor arbitration is distinctly different from commercial arbitration. Labor arbitration supports the collective bargaining process, whereas commercial arbitration is simply a substitute for litigation. Despite the differences, the Court in the last two decades has conflated labor arbitration and commercial arbitration. This conflation is troubling because labor arbitration may become a substitute for litigation, rather than a tool to support the collective bargaining process. This shift reflects a sharp departure from the original purposes of labor arbitration.