In the unanimous opinion titled Morgan v. Sundance, Inc., No. 21-328 (May 23, 2022), the U.S. Supreme Court refused to send an overtime claim to arbitration when Sundance, Inc., failed to ask the court to compel arbitration until eight months after the lawsuit was filed. The high Court also rejected a finding by the lower courts that there could be no waiver of arbitration unless the plaintiff could show prejudice in connection with the defendant’s delays leading to the waiver.
Plaintiff Robyn Morgan worked at a Sundance-owned Taco Bell franchise. Although Morgan had signed an arbitration agreement to resolve employment disputes, she filed a nationwide collective action against Sundance, claiming violations of the Fair Labor Standards Act (FLSA). Morgan alleged that Sundance violated FLSA, in terms of overtime, by recording hours worked in one week in a different week to prevent employees’ weekly total hours from exceeding 40 hours.
Sundance initially responded to the lawsuit by filing a motion to dismiss because the suit duplicated other collective actions previously filed by other Taco Bell employees. Sundance then asserted 14 different defenses to the suit, making no mention of the arbitration agreement.
After settling another plaintiff’s claim, but not Morgan’s claim, Sundance filed a motion to compel arbitration. The plaintiff argued that Sundance had waived its right to arbitration by litigating the claim for eight months before seeking to compel arbitration.
The district court judge found that the plaintiff suffered harm due to Sundance’s delay in demanding arbitration, but the 8th Circuit disagreed on appeal.
The Supreme Court decision resolved a split between the federal appellate courts as to whether a party claiming that its adversary has waived its contractual right to arbitrate must show prejudice from the conduct leading to the waiver. The Court decisively concluded that a party seeking to compel arbitration could not rely on an absence of harm to the other party to justify its delays in seeking arbitration. The Court pointed out that although the Federal Arbitration Act (FAA) favors arbitration, it does not authorize federal courts to create special procedural rules that prefer arbitration. Instead, the Court emphasized that courts should consider arbitration agreements in the same manner as other contracts.
The Supreme Court remanded the case to the appellate court to determine whether Sundance had knowingly relinquished its right to arbitrate by acting inconsistently with that right. The Court also ruled that, alternatively, the appellate court may determine that a different procedural framework is appropriate.
HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.
Hall Benefits Law, LLC
Latest posts by Hall Benefits Law, LLC (see all)
- Fifth Circuit Considers Arbitration Clause in ERISA Claim - March 20, 2026
