Arbitration – Part 1

A federal appeals court ruled that an employer could dismiss employees who refused to agree to a new “mandatory arbitration” policy.

Church Law and Tax2003-07-01

Arbitration – Part 1

Key point 10-16.8. Churches have various defenses available to them if they are sued as a result of a personal injury. One such defense is an arbitration policy. By adopting an arbitration policy, a church can compel members to arbitrate specified disputes with their church rather than pursue their claim in the civil courts.
Negligence as a Basis for Liability

* A federal appeals court ruled that an employer could dismiss employees who refused to agree to a new “mandatory arbitration” policy in an employment handbook that required all employment related disputes to be resolved by arbitration. A company issued a new employee handbook to its employees. The handbook included an arbitration provision that required all claims by employees arising out of their employment to be resolved through arbitration. The arbitration provision specified:

The company and I each agree and understand that we choose arbitration instead of litigation to resolve any dispute between us. The company and I each understand that we have a right or opportunity to litigate disputes through a court, but we prefer to resolve our disputes through arbitration. Each of the parties to this employment arbitration policy voluntarily and knowingly waive any right they have to a jury trial either pursuant to arbitration under this clause or pursuant to a court action by the company. The company and I agree and understand that all disputes arising under case law, statutory law and all other laws, including but not limited to, all contract, tort, workmen’s compensation, retaliatory discharge, Title VII claims or actions, and all actions based upon any form of discrimination (cumulatively referred to herein as “employment related disputes” for the purposes of this contract) based on a legal claim will be subject to binding arbitration in accordance with this contract.

The company required all of its employees to agree to the arbitration provision as a condition of continued employment. Some employees refused to agree to the new arbitration policy, and the company terminated their employment. The dismissed employees sued the company, claiming that their dismissals amounted to unlawful “retaliation” for asserting their legal rights under Title VII of the Civil Rights Act of 1964 (which prevents covered employers from discriminating against employees on the basis of race, color, national origin, gender, or religion).

A federal appeals court concluded that the company did not commit unlawful “retaliation” by dismissing employees who refused to agree to the new arbitration policy. It noted that for dismissed employees to prove retaliation, they had to show that they “had a good faith, reasonable belief that the employer was engaged in unlawful employment practices,” and that they were terminated for refusing to comply with those practices. The court concluded that it was not possible for the dismissed employees to have had such a belief, because the United States Supreme Court ruled in 2001 that arbitration clauses in employment contracts are lawful. Circuit City Stores v. Adams, 532 U.S. 105 (2001). The court also noted that Congress approved the use of arbitration to resolve employment discrimination claims in the Civil Rights Act of 1991. The 1991 Act specifically includes a provision on arbitration, stating that “where appropriate and to the extent authorized by law, the use of alternative means of dispute resolution, including arbitration, is encouraged to resolve disputes arising under the Acts or provisions of federal law amended by this title.” Congress also approved of arbitration when it enacted the Americans with Disabilities Act, by inserting the following provision, “Where appropriate and to the extent authorized by law, the use of alternative means of dispute resolution, including arbitration, is encouraged to resolve disputes arising under this Act.” The court concluded, “We see no reason to depart from our own precedent, the mandate of the Supreme Court, and the holdings of almost every other [federal court of appeals] to find that compulsory arbitration agreements constitute an unlawful employment practice. We are not persuaded that the plaintiffs in this case could have reasonably believed that such agreements were an unlawful employment practice at the time they refused to agree to the policy.”

Application. This case is important for the following reasons.

1. It demonstrates that efforts by employers to compel employees to submit employment disputes to binding arbitration instead of the courts may be legally appropriate.

2. The court did not question the company’s position that its employees’ “continuing employment” was sufficient “consideration” for their agreement to be bound by the new mandatory arbitration policy. The ability of employers to apply new policies to current employees has been a troubling legal question. In general, for a promise or commitment (such as an employee’s “agreement” to be bound by a new employer policy) to be legally enforceable, the employee must receive some “consideration” or value in exchange for his or her agreement. Is continuing employment sufficient consideration to extend new policies to current employees? The courts have reached different conclusions with respect to this question, but this case represents a strong precedent in favor of such a view since it represents the conclusion of a federal appeals court.

3. The court cautioned that some arbitration clauses in employment handbooks may be unenforceable. It cited three examples: (1) Employees who do not personally agree to an arbitration provision cannot be bound by it. (2) Arbitration provisions only apply to disputes that are specifically mentioned in the policy. (3) Arbitration provisions that are “one-sided because they give the employer but not the employee the right to insist on arbitration” are not enforceable. The court concluded, “In this case, in contrast, the arbitration provision that was submitted to the employees was for individual employee approval, it expressly covered federal statutory claims, and it made arbitration available to both sides.” Weeks v. Harden Manufacturing Corporation, 291 F.3d 1307 (11th Cir. 2002).

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations." Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

ajax-loader-largecaret-downcloseHamburger Menuicon_amazonApple PodcastsBio Iconicon_cards_grid_caretChild Abuse Reporting Laws by State IconChurchSalary Iconicon_facebookGoogle Podcastsicon_instagramLegal Library IconLegal Library Iconicon_linkedinLock IconMegaphone IconOnline Learning IconPodcast IconRecent Legal Developments IconRecommended Reading IconRSS IconSubmiticon_select-arrowSpotify IconAlaska State MapAlabama State MapArkansas State MapArizona State MapCalifornia State MapColorado State MapConnecticut State MapWashington DC State MapDelaware State MapFederal MapFlorida State MapGeorgia State MapHawaii State MapIowa State MapIdaho State MapIllinois State MapIndiana State MapKansas State MapKentucky State MapLouisiana State MapMassachusetts State MapMaryland State MapMaine State MapMichigan State MapMinnesota State MapMissouri State MapMississippi State MapMontana State MapMulti State MapNorth Carolina State MapNorth Dakota State MapNebraska State MapNew Hampshire State MapNew Jersey State MapNew Mexico IconNevada State MapNew York State MapOhio State MapOklahoma State MapOregon State MapPennsylvania State MapRhode Island State MapSouth Carolina State MapSouth Dakota State MapTennessee State MapTexas State MapUtah State MapVirginia State MapVermont State MapWashington State MapWisconsin State MapWest Virginia State MapWyoming State IconShopping Cart IconTax Calendar Iconicon_twitteryoutubepauseplay