Arbitration – Part 2

An Ohio court ruled that an employee could not sue her employer for sexual harassment because she agreed to submit all work-related disputes to binding arbitration.

Church Law and Tax2003-07-01

Arbitration – Part 2

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

* An Ohio court ruled that an employee could not sue her employer for sexual harassment because she agreed to submit all work-related disputes to binding arbitration at the time she was hired. A woman (Lisa) applied for a job as a receptionist at a fitness center. The employment application contained a statement that the employer used arbitration to resolve work-related disputes. Lisa was required to indicate her acceptance of this and several other provisions by signing her name. The application contained the following statement, “If you have any questions regarding this statement, please ask a company representative before signing. Do not sign until you have read the above statement and agreement.” Lisa signed the application, but conceded that she had not read it in its entirety. She only read what she deemed necessary to complete the information blanks in the application. Lisa was hired, and went through employee orientation. At this time she was given an employee handbook which clearly explained that in exchange for the company’s offer of employment, Lisa agreed to resolve all employment-related disputes through the company’s arbitration policy. The arbitration policy requires employees to arbitrate employment disputes, and prevents the filing of lawsuits regarding all covered disputes, including “tort claims, claims for discrimination, and claims for violation of any federal, state or other governmental constitution, statute, ordinance or regulation.” Lisa signed a form during employee orientation in which she agreed to be bound by the handbook and arbitration policy. The company completed a “new hire checklist” for each new employee, and one was prepared for Lisa indicating all the forms she received and signed including the arbitration policy and employee handbook.

The arbitration policy stipulates that the employer may modify the terms of the agreement unilaterally during the course of employment, it limits the time to file a claim to one year for most claims, it is silent pertaining to the cost of arbitration, and allows the company to litigate specified claims in any forum while limiting the employee’s right to do the same and precludes the right to a jury trial.

Lisa’s employment ended several months later, and she sued her former employer for sexual harassment, sex discrimination, hostile work environment, negligent retention in the workplace and related claims. The company asked the court to dismiss the case on the basis of Lisa’s “agreement” to arbitrate all work related claims. An Ohio court dismissed the case on the basis of the arbitration policy, and Lisa appealed on the following grounds: (1) she never agreed to the arbitration policy, (2) the arbitration policy was unenforceable because she never was given any “consideration” (value) in exchange for her agreement to be bound by the policy, (3) she was unaware of the arbitration agreement, and (4) deception.

no agreement

The court noted that in order for a valid contract to exist, there must be mutual assent (a “meeting of the minds”), an offer and acceptance of the offer, and consideration. Lisa claimed that there was no meeting of the minds because an employee may not modify the language of the arbitration agreement prior to being hired; therefore, there is unequal bargaining power between the parties. Further, she claimed that there was no “mutual assent” to the terms of the arbitration agreement because she was unaware the arbitration clause existed and was unfamiliar with the terms of it; the employer “rushed” the orientation process, did not explain the arbitration policy and did not personally hand her a copy of the document which she signed; and, the employer was in a superior bargaining position.

no consideration

Lisa claimed that there was no consideration for the contract. Under contract law, a promise is legally enforceable only if the person making the promise receives something of value (“consideration”) in exchange for the promise. Lisa claimed that she received no consideration in exchange for her promise to be bound by the arbitration agreement, and therefore her promise to be bound by it was unenforceable. The court disagreed. It concluded that an employer’s offer of employment “is sufficient legal consideration to support a contract.”

no awareness of the arbitration policy

Lisa claimed that she was unaware of the arbitration policy because she did not carefully read the form she signed agreeing to be bound by the arbitration policy, or the policy itself or the employee handbook. The court rejected this as a basis for avoiding the legal effect of the documents she signed, noting that “a person of ordinary mind cannot be heard to say that he was misled into signing a paper which was different from what he intended, when he could have known the truth by merely looking when he signed.”


Lisa argued that the employer engaged in deception by instructing her to appear at work dressed and ready to begin, and then upon her arrival, having her sign 18 different papers prior to beginning her job in order to “divert her attention” away from the arbitration clause. Once again, the court disagreed:

We disagree that the signing of the contract did not meet the fundamental elements of contract formation. Lisa’s action of signing the [agreement to the arbitration policy] acknowledges she read and understood the terms of the policy. The parties to an agreement should be able to rely on the fact that affixing a signature which acknowledges one has read, understood, and agrees to be bound by the terms of an agreement means what it purports to mean. The parties to a contract must be able to rely on the statements enclosed in the documents asserting the other party understood the terms and conditions of the agreement. Lisa desires an interpretation of contract law that, although one party acknowledges in writing she consents to be bound by the terms of an agreement, the subjective state of mind of the individual should prevail at a later time and date when the terms of the agreement now seem unfavorable to that party’s position.

It is clear in this case that the arbitration policy was introduced to Lisa at several times prior to her employment and was also displayed in plain sight after she began employment. She claims she was completely oblivious to the existence of the policy, but it was posted in the break room at her place of employment. The policy was identified in the application for employment, and the policy in its entirety was included in the new hire packet with a separate page upon which an acknowledgment form was displayed explaining the policy and requiring a signature of the potential employee to commence work. This was not a clause hidden among numerous pages of forms. The policy was presented in the application, the employee handbook and the agreement itself. The policy required a signature of acknowledgment to be bound by its terms. Lisa was given an opportunity to pose questions immediately or take the documents home to have another person review them. She admitted she read only part of the new hire packet, the page to which she must affix a signature, to speed up the orientation process herself. Although there may have been distracting elements present, such as an orientation video playing, there is no evidence that the employer rushed her to sign the papers and deprived her of any information pertaining to the agreement …. Whether she read the paperwork or disregarded the paperwork, she signed the papers stating she agreed to the terms of the arbitration policy in order to be hired. She cannot now claim that failing to read the terms of a contract when given the express opportunity to do so amounts to an unconscionable contract.

Application. There are a number of aspects to this decision that are relevant to church leaders. Consider the following:

1. Agreements to submit employment related disputes to binding arbitration are generally enforced by the courts so long as the arbitration process is fair and unbiased and the parties clearly consented to the terms of the agreement.

2. The courts generally reject employees’ claims that they are not bound by provisions in employment contracts or policies because they didn’t read them.

3. The court concluded that an offer of employment is sufficient “consideration” for an employee’s agreement to be bound by an arbitration policy.

4. The fact that Lisa signed a form agreeing to be bound by the arbitration policy in the course of signing 18 different forms during her new employee orientation did not nullify the legal validity of those forms, since “the parties to an agreement should be able to rely on the fact that affixing a signature which acknowledges one has read, understood, and agrees to be bound by the terms of an agreement means what it purports to mean.” Butcher v. Bally Total Fitness Corporation, 2003 WL 1785027 (Ohio App. 2003).

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