Labor: New options for compelling arbitration in employment disputes

An employer’s right to require arbitration of class claims is not universal

Thanks to a decision by the U.S. Supreme Court involving a consumer class action claim, employers now have more options for requiring arbitration as to most class action and single-party employment litigation. In AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011), the court found that the Federal Arbitration Act controlled over state laws that nullify binding arbitration for class claims. This decision has been applied to qualifying arbitration agreements in employee handbooks acknowledged by the employee. See Liman v. Cellco P’ship, Green v. SuperShuttle Int’l, Inc., and Cruz v. Cingular Wireless, LLC.

An employer’s right to require arbitration of class claims is not universal and does require specific qualifying elements. This article will address two of those key elements: consent and scope.

First, there must be consent by the employee to arbitrate. The case law addressing the degree of consent is inconsistent. In Michigan, a court found that although an employee signed a form acknowledging that she had read and understood the terms of the employment handbook, the arbitration provision in the handbook was not enforceable under state law. Hergenreder v. Bickford Senior Living Group, LLC 665 F.3d 411 (6th Cir. 2011).

However, in Quilloin v. Tenant Healthsystem Phila., Inc., the court found that where an employee twice signed a document acknowledging arbitration of employment claims and also received a brochure outlining the internal grievance procedure and arbitration provisions, the arbitration agreement was enforceable. The court focused on the general versus specific consent by the employee. A general acknowledgment of receipt of the employer’s handbook is less supportive than a specific agreement to arbitrate acknowledged by the employee. To ensure consent, it is recommended that the arbitration agreement be clear, concise, and either a separate agreement signed as part of the employment process or a designated section in the handbook with a confirmed acknowledgment specific to arbitration.

The second element is the scope of the arbitration agreement. In. Ibarra v. UPS, a female employee terminated for allegedly causing a motor vehicle accident filed a grievance before the union. The issue of sex discrimination was not raised at the grievance level. The grievance failed and the termination was upheld. The employee sued in federal court for alleged sex discrimination under Title VII. The court held that the employee’s case could proceed. The union’s grievance/arbitration agreement was silent as to federal claims. As such, the agreement did not “clearly and unmistakably” waive the employee’s right to bring a Title VII claim, even after completing the contractual arbitration requirements.

However, if an arbitration agreement contains provisions that would be considered unconscionable in scope, there may be options to proceed if the employer agrees to strike those provisions. In Rogane v. Atlantic Video., the employer agreed to waive a reduced-statute-of-limitations provision and a fee-shifting provision. The court found that the employee was required to arbitrate under the revised agreement. The employer would have lost its right to proceed to arbitration if it had wished to enforce the terms at issue. However, employers should not rely on waiver of unconscionable provisions to insure enforceability.

Employers can most benefit from arbitration provisions when the terms are unequivocal, with knowing and verifiable consent by employees. Overreaching terms or generic consents within an employee handbook are less effective and may create more litigation instead of less.

Contributing Author

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Cheryl Wilke

Cheryl Wilke is a partner in the Ft. Lauderdale office of Hinshaw & Culbertson and focuses her practice in the representation of employers in...

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