Category Archives: Arbitration Agreements

Missouri Supreme Court: Arbitration Agreements Signed At Hiring Are Supported By Consideration

Contributed by Brian Wacker, February 6, 2018

scales of justice

The enforceability of arbitration agreements with employees in Missouri has been an area of uncertainty for some time.  However, the Missouri Supreme Court recently offered some clarity in a decision sure to be cheered by employers seeking to keep employee disputes out of court.

In Easter Seals Midwest v. Soars, the court was asked to weigh in on the enforceability of an arbitration agreement an employee signed as a necessary condition of initial employment with his employer.  The agreement in question was a standalone agreement, offered at the time the employee was hired, and included what is called a “delegation clause,” which gave the arbitrator (not the courts) the exclusive authority to resolve disputes relating to the agreement’s interpretation, applicability and enforcement.

When the employee was terminated for refusing to participate in an employee investigation into alleged abuse and neglect of clients, he filed suit in state court against the employer for wrongful discharge and race discrimination. The employer moved to enforce the agreement and compel arbitration of the employee’s claims, which the employee opposed arguing that the agreement lacked consideration, among other things.

The lower court denied the motion to compel, but the supreme court reversed.  In doing so, the court approved of the agreement, including its delegation clause, noting that arbitration agreements are to be considered separate and apart from any underlying or contemporaneous agreements. 

Of particular note, the court distinguished its prior holding in Baker v. Bristol Care, in which it held that continued at-will employment is not adequate consideration to form an enforceable arbitration agreement.  According to the court, there is a “paramount” difference between considering whether consideration exists in an offer of continued at-will employment and an offer of initial at-will employment. 

This is an important development from the court that clears up employers’ uncertainty as to the enforceability of arbitration agreements executed at the time of hire. Whether this is a harbinger of change with respect to enforcement of arbitration agreements entered into in consideration of continued at-will employment is an issue to be monitored. However, based on the court’s discussion of Bristol, such change seems unlikely any time soon.

Also of note: in embracing the agreement’s delegation clause, the court gave its stamp of approval for arbitrators to resolve disputes over the enforceability and interpretation of arbitration agreements. Assuming arbitrators have read the court’s holding in Soars, employers can have increased confidence that their arbitration agreements with employees will be enforced and withstand scrutiny. 

In light of Soars, employers in Missouri would be well served to review the arbitration agreements they offer at the time of hire, specifically to ensure that a valid delegation clause is included. 

Tech Industry Employees Protest for End to Mandatory Arbitration

Contributed by Michael Faley, January 24, 2019

Arbitration title on legal documents

In November, thousands of Google employees walked out of work in protest against the company’s practice of compelling mandatory arbitration in sexual harassment claims. Frequently referred to as “forced arbitration” in the context of the current debate, Google responded by modifying its new hire letters to make mandatory arbitration optional for sexual harassment and assault claims. Several other big-name tech companies followed suit and ended the practice for sexual harassment claims.   

Now on the heels of that initial success, tech industry employees are pushing for an end to all mandatory arbitrations for employee-related claims. Last week, protestors, organized under a group called Googlers for Ending Forced Arbitration, conducted a massive social media campaign pressing Google and other tech companies to eliminate their mandatory arbitration schemes for employee claims. Members of Googlers for Ending Forced Arbitration argue that mandatory arbitration schemes lack transparency and enable misconduct against employees. They view going to court as the solution, and demand that arbitration always be optional. In addition, they seek elimination of onerous confidentiality requirements and want an end to class-action waivers so employees can file similar claims together. 

So far, neither Google nor the other targeted tech giants have signaled a willingness to change their current mandatory arbitration schemes beyond the recent modification for sexual harassment claims. However, groups such as Googlers for Ending Forced Arbitration do not appear to be letting up either. Undoubtedly, the scope and general use of mandatory arbitration clauses will continue to be a hot topic of debate in 2019.

UPDATE: Supreme Court Rules For Workers On FAA “Transportation” Exemption

Contributed by Brian Wacker, January 15, 2019 

Last month, this blog discussed New Prime, Inc. v. Oliveira, a then-pending case before the Supreme Court that presented the question of whether arbitration agreements between trucking companies and independent contractor drivers fall within the “transportation” exemption to the Federal Arbitration Act (“FAA”).   

This morning, the Court unanimously ruled in favor of Mr. Oliveira, affirming the First Circuit and holding that his independent contractor agreement with New Prime is a “contract of employment” under the FAA.  The Court disregarded the characterization of his relationship with New Prime as an independent contractor (as opposed to an “employee”) and found that the FAA’s exemption for “contracts of employment” refers to any “agreements to perform work.” Therefore, Mr. Oliveira’s agreement fell within the FAA’s exemption and his claims were not properly subject to compelled arbitration.  

This is a significant victory for workers, especially considering the unanimity of the Court’s decision, authored by one of its more conservative jurists, Justice Gorsuch. Employers with independent contractors in the transportation field should take note: existing arbitration provisions in independent contractor agreements can no longer be used to shield businesses from the risks, expenses and uncertainty of litigation in court.

Are Independent Contractor Transportation Workers Exempt from the Federal Arbitration Act?

Contributed by Brian Wacker, December 10, 2018

The Supreme Court recently heard arguments on an issue which will have lasting implications on the arbitrability of claims between employers and certain independent contractors. Where the Court lands will have significant impact on employers moving forward, not only with regard to the form of contracts employers offer, but also with regard to how they classify workers in the transportation field.

Currently, the Federal Arbitration Act (the “FAA”) authorizes transportation employers to include mandatory arbitration provisions in employment contracts, which can require employees to arbitrate workplace disputes in lieu of going to court, and limit them to bringing those claims individually. This is obviously a strong tool for employers seeking to minimize the uncertainty and costs of litigation.

SupremeCourtBuilding

Supreme Court Building

However, as employers with workers engaged in transportation should know, an exception is made in Section 1 of the FAA, exempting “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” 9 U.S.C. §1. This has become known as the “transportation” exemption. Historically, Congress included this exemption, in part, because transportation workers were subject to separate federal dispute resolutions statutes already in effect.

In New Prime, Inc. v. Oliveira, Sup. Ct. Case. No. 17-340, the Court considered the “transportation” exemption in the FAA – specifically two issues: (1) whether disputes over its applicability should be resolved by an arbitrator or a judge and (2) whether the exemption applies to independent contractors as well as employees.

The scope of the “transportation” exemption has been wrangled over for years, culminating in the 2001 landmark decision in Circuit City Stores, Inc. v. Adams, where the Court plainly read the exemption, holding that it did not apply to any workers outside of the delineated transportation industries. In other words, non-transportation workers could no longer try to seek the benefit of the exemption.

Despite this precedent, workers have continued to try to expand its application with New Prime being just the latest example – this time to independent contractors working in the transportation field. Following submissions and several amicus briefs in support of both sides, the issue and positions of the parties were clear. When defining the exemption’s scope, it uses the term “contracts of employment.” New Prime, the Petitioner, has asked the Court to interpret this term narrowly, arguing it should mean only those contracts that establish a common-law employment relationship. Oliveira, the Respondent, argued the term should refer to all agreements to perform work, regardless of form, which would necessarily include independent contract agreements.

The Court heard oral argument on October 3, 2018. Because the case was submitted prior to new Associate Justice Kavanaugh’s confirmation, the case was only heard by eight justices. So if the justices split along ideological lines 4-4, Oliveira will prevail and the First Circuit’s ruling that the independent-contractor agreement at issue was a “contract of employment” for purposes of the exemption.

The Court is not expected to rule until early 2019. This blog will update as soon as the Court’s opinion is issued.

Employers: Make Sure You Are A Party To Your Own Arbitration Agreements

Contributed by Steven Jados, August 7, 2018

52078340 - 3d illustration of rubber stamp on arbitration agreementWith the dust settling on the U.S. Supreme Court’s decision upholding the validity of class and collective action waivers in employee arbitration agreements, there is no better time to double-check that employee arbitration agreements are in proper form. A recent decision from the Seventh Circuit highlights one particular area for review: the employer’s name.

In Goplin v. WeConnect, Inc., the employee, Goplin, worked for WeConnect, and he signed an arbitration agreement at the beginning of his employment. Unfortunately for WeConnect, the arbitration agreement never once mentioned WeConnect.  Instead, the agreement referred to an entity named “AEI”—which was not Goplin’s employer.

When WeConnect attempted to enforce the arbitration agreement to compel Goplin to pursue his legal claims with an arbitrator, the court agreed with Goplin that WeConnect was not a party to the arbitration agreement, so WeConnect could not use the agreement to prevent Goplin from suing in court.

The bottom line is that employers must closely review employee arbitration agreements to ensure that all parties to the agreement are properly named—particularly when the employer has undergone a name change or merger in the time since the agreement was drafted. Doing so will help ensure that the agreement has a greater likelihood of enforceability if the agreement is challenged in court.

U.S. Supreme Court to Address Legality of Class Action Waivers in Arbitrations Agreements

Contributed by Suzanne Newcomb, January 17, 2017

16306823 - 3d illustration of scales of justice and gavel on orange background

16306823 – 3d illustration of scales of justice and gavel on orange background

The U.S. Supreme Court announced Friday, January 13, 2017 that it will hear a trio of cases concerning the right of employers to include class action waivers in employment-related arbitration agreements. Arbitration agreements are contracts through which an employee and an employer agree to resolve potential future disputes through binding arbitration rather than through the courts. Class action waivers are provisions in arbitration agreements that prohibit employees from joining together to arbitrate multiple related claims in a class or collective action. If such a waiver is enforced, employees are required instead to arbitrate each employee’s dispute separately.

The general counsel for the National Labor Relations Board (NLRB) has long argued, with varying degrees of success, that the right to engage in collective legal action is itself “concerted activity” protected by Section 7 of the National Labor Relations Act, and therefore, it is unlawful to ask employees to waive that right.

As we reported here, the Federal Court of Appeals for the Fifth Circuit (Louisiana, Mississippi and Texas) rejected the general counsel’s argument back in 2013 and upheld an employer’s right to include a class action waiver in an employment arbitration agreement. Other circuits agreed. However, the NLRB continued to challenge these provisions, and as a result, many employers remained wary.

In May 2016, the Federal Court of Appeals for the Seventh Circuit (Illinois, Indiana, and Wisconsin) sided with the NLRB’s general counsel. The seventh circuit struck down a class action waiver concluding it was an impermissible restraint of employees’ right to engage in “protected concerted activities.” Later in the year the ninth circuit followed suit. This split between the circuits further clouded the issue, leaving employers with no clear answer.

It is this difference of opinion between the federal courts of appeal that prompted the Supreme Court to agree to hear the issue. While a definitive ruling is not guaranteed, the fact that the Supreme Court granted certiorari (i.e. agreed to hear) three cases on the issue (consolidating them for purposes of oral argument) suggests the Court intends to issue a definitive ruling. Resolution on this issue will provide employers with welcome clarity and certainty regardless of how the Court ultimately rules on the legality of class action waivers in employment arbitration agreements.

For now, employers should stay the course. We will continue to monitor the issue and report on significant developments as they arise.