An Ohio court ruled that an employee was bound by a form she signed when hired agreeing to submit any employment-related dispute to binding arbitration.

Church Law and Tax2004-03-01


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 was bound by a form she signed when hired agreeing to submit any employment-related dispute to binding arbitration rather than to the civil courts. A young woman (Amy) applied for a position with a fitness center. She completed an employment application containing an acknowledgment with a signature line advising her that the center utilized an employment dispute resolution procedure (“EDRP”) to handle work-related disputes. The acknowledgment stated, “The company has established an alternative dispute resolution procedure to resolve disputes arising out of the employment context. I agree to be bound by the terms of the procedure as a condition of employment concerning any disputes or claims covered under the procedure. I understand that I have the right to request and review a copy of the procedure. If you have any questions regarding this statement, please ask a Company representative before signing.” Just above the signature line on the application was the following statement, “Do Not Sign Until You Have Read The Above Statement And Agreement.” Amy signed the application, but later conceded that she had not read the application in its entirety. She only read what she deemed necessary to complete the information blanks in the application.

The terms of the company’s arbitration procedure require employees to arbitrate all employment disputes and prevents the filing of civil lawsuits including “tort claims, claims for discrimination; or claims for violation of any federal, state or other governmental constitution, statute, ordinance or regulation.”

Amy’s employment was terminated a year after she was hired, and she filed a lawsuit in civil court against the company in which she alleged sexual harassment and discrimination. The company asked the court to dismiss the lawsuit and order Amy’s claims to be resolved on the basis of its arbitration policy. A trial court agreed, and Amy appealed. A state appeals court affirmed the trial court’s order that that dispute be resolved through arbitration. It noted that “the courts favor the settlement of disputes through arbitration,” but cautioned that “the courts will not enforce an arbitration agreement when (1) the arbitration clause is not applicable to the dispute or issues at hand, or (2) the parties did not agree to the clause.” Amy claimed that she received no “consideration” for her agreement to arbitrate disputes, the arbitration policy was not enforceable because it was “unconscionable,” and she did not knowingly waive her right to resolve disputes in court.

The court agreed that consideration is a requirement for a binding contract. It defined consideration as something of value that a person receives in exchange for a promise or commitment. If there is no consideration, a “promise” is illusory and void. But the court rejected Amy’s claim that she received no consideration in exchange for her promise to abide by the arbitration policy. It noted that “generally, the court does not inquire into the adequacy of consideration to support the contract,” and that “the company’s offer of employment is sufficient legal consideration to support the contract.”

In rejecting Amy’s claim that she was “unaware” of the arbitration agreement, the court observed that “one who fails to read what they have signed” cannot later argue that they should not be bound by it. The court further observed that Amy “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.” The court concluded,

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 …. It is clear in this case that the arbitration policy was introduced to Amy at several instances 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 …. The policy was identified in the application for employment, and … 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. Amy 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 company rushed her to sign the papers and deprived her of any information pertaining to the agreement …. [Amy] was free to find other employment rather than agree to be bound by the terms of the policy to address any employment-related disputes. Whether she read the paperwork or disregarded the paperwork, she signed the papers stating she agreed to the terms of the 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. Our research demonstrates that employment disputes are one of the most common forms of church litigation. Church leaders should consider the potential benefits of mediation or arbitration clauses in employment contracts involving both ministers and lay employees. Of course, the services of a local attorney will be invaluable in helping you evaluate the merits of an arbitration clause, and in drafting one. For additional information on arbitration clauses in church employment contracts and employee handbooks, see the feature article in the July-August 2001 issue of this newsletter. Butcher v. Bally Total Fitness Corporation, 2003 WL 1785027 (Ohio App. 2003).

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