Mmmmmmmm, arbitration clauses
Labels: alternative dispute resolution, employment policies 7 commentsArbitration clauses and their enforceability is not the most scintillating topic in the annals of employment law. So, I took some (but not much) notice of today’s 6th Circuit decision in Seawright v. American General Financial Services, in which the Court upheld an arbitration clause contained in an employment policy over the employee’s objection that she had never assented to be bound by its terms as she never signed any acknowledgment of the policy. The majority found that Seawright’s mere continued employment after receiving the policy constituted valid assent. Because she continued working and never objected to the arbitration clause, she was bound by it.
The dissent, clearly troubled by the notion using the failure to express a lack of assent as evidence of assent, illustrates its point by quoting one of the great thinkers of the late twentieth and early twenty-first centuries, Homer Simpson:
Homer Simpson talking to God: “Here’s the deal: you freeze everything as it is, and I won’t ask for anything more. If that is OK, please give me absolutely no sign. [no response] OK, deal. In gratitude, I present you this offering of cookies and milk. If you want me to eat them for you, please give me no sign. [no response] Thy will be done.” The Simpsons: And Maggie Makes Three (Fox television broadcast, Jan. 22, 1995).
Who says cartoons rot your brain?
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11/14/07 9:16 AM
It is important to note that Seawright was based upon Tennessee contract law, not Ohio contract law.
11/14/07 9:38 AM
You are correct that this case came out of Tennessee and was governed by Tennessee law. The law of contracts (which governs the enforceability of arbitration clauses), though, is generally the law of contracts, and there is not much difference between states, a point highlighted by the dissent's reliance on the Restatement of Contracts. I haven't done an analysis of Ohio law versus Tennessee on this issue, but my guess is that the Court would have come out the same if the case came out of Ohio. Indeed, the main case the majority relied on for the point of law I discussed -- Morrison v. Circuit City -- comes out of the Southern District of Ohio and was decided under Ohio law.
11/14/07 9:54 AM
Consider Strasser v. Fortney & Weygandt, an unreported Cuyahoga County appellate case, which holds that an employer cannot unilaterally impose an arbitration program contained in an employee handbook. This is a fundamental difference from Tennessee law.
11/14/07 10:32 AM
I actually don't think you and I disagree on this issue, not that I wouldn't have fun trying to enforce an arbitration clause in an employee handbook or other policy statement if presented with the challenge.
I posted on the Seawright decision solely becuase I thought the dissent's reliance on Homer Simpson as authority for its rationale was hilarious.
11/15/07 10:46 AM
I don't think the Strasser case is necessarily at odds with the Seawright decision. In Strasser the arbitration provision was contained in a handbook that very clearly and specifically stated that the handbook was not a contract. The handbook also gave the employer the unfettered right to modify and/or terminate policies. The issue in Strasser wasn't so much the question of whether the employee assented (as was the issue in Seawright), but whether the employer was bound. By disclaiming a contract and retaining the option to escape the provision completely, the employer rendered its arbitration policy worthless. This makes Strasser a very different case than Seawright where the arbitration program was not part of a document which specifically denied being a contract and which was not immediately revocable. I think the bigger question after Seawright is whether the court would have reached the same result if Lisa Seawright had not been an "educated, managerial employee."
But, as Jon said, the Homer quote was undoubtedly the highlight.
11/15/07 11:14 AM
I'm left troubled by the manner in which the dispute resolution program was distributed to the plaintiff in Seawright. It was announced in informational meetings, and then in a letter to employees with an informational brochure on the program. I'm having trouble distinguishing an informational brochure from an employee handbook, notwithstanding the disclaimer in the Strasser case. I'd like to see, at a minimum, a signed acknowledgment to bind an employee.
Take, for example, that in Ohio continued employment is sufficient consideration to enforce a non-compete agreement, but I don't think any court would bind an employee to a non-compete provision in an informational brochure or letter advising of some new program. While non-compete and arbitration agreements are different, they are both generally disfavored because of strong public policy concerns - restraints of trade for the former and the right to access to court and jury trials for the latter. I'm having difficulty binding an employee to giving up those fundamental rights without an express agreement to do so, evidenced by something signed by the employee.
11/18/07 4:56 PM
I think it is possible to harmonize Strasser (2001 Ohio App. LEXIS 5738) and Seawright by distinguishing between the handbook in Strasser which the employer went some lengths to make sure would not give rise to an enforceable contract under Ohio law and the more focused provision in Seawright that was binding on both employee and employer. However,of perhaps more interest is dicta in a more recent Franklin County case which is consistent with the result in Seawright. In Corl v. Thomas & King, 2006 Ohio 2956, 2006 Ohio App. LEXIS 2828 involving an employee recently promoted to manager at an Applebee's who HAD signed a compnay manager's handbook and even initialed arbitration provisions, there was some disagreement as to when the promotion had occurred. While the case was decided on the basis of the signed agreement,in dicta the Court said, "even if plaintiff were promoted to manager prior to October 1, 2002, plaintiff's continued employment with Applebee's and Applebee's forbearance from discharging plaintiff served as consideration needed to form an agreement."