Whether arbitration is the most efficient mechanism for resolving employment disputes is for another day. For now, more and more employers require their workers to submit their disputes to arbitration on an individual basis. Arbitration continues to gain momentum and popularity as a preferred mechanism to resolve employment disputes in a more economical, efficient, and confidential manner. Courts routinely enforce arbitration agreements and order employees or former employees to pursue the relief they seek in an arbitral forum and, if appropriately drafted, on an individual basis rather than as part of a class.
You likely already know whether your company’s policies require disputes to be resolved in arbitration. But you should take a closer look. Have you signed your employment agreements or dispute resolution policies? Oftentimes, employers include arbitration and class waiver provisions in their standard employment agreements; others have stand-alone dispute resolution agreements that specify arbitration is the preferred forum to resolve disputes. But are they enforceable? Or have you overlooked a barrier to enforcement that will surprise you later after a former employee sues your business? Rest assured savvy plaintiffs lawyers are looking for some basis to avoid your agreements. You can avoid many pitfalls by simply reviewing your agreements to ensure they comply with the law and taking advantage of recent employer-friendly decisions.
This month, the U.S. Court of Appeals for the Fifth Circuit refused to enforce a company’s arbitration provision that one of its employees had signed. The Fifth Circuit entertains appeals from federal courts in Texas, Louisiana and Mississippi. In Huckaba v. Ref-Chem, __ F.3d __ (5th Cir. 2018), a former employee in Texas sued her former employer for sexual harassment, discrimination and retaliation. The employer asked the court to enforce a dispute resolution agreement acknowledgment the former employee signed when she worked for the company and order the former employee to pursue her claims in arbitration. The trial court granted the employer’s request, ordered the parties to arbitrate their disputes, and dismissed the employee’s lawsuit. This type of procedural history is not all that uncommon.
However, the employee appealed the trial court’s ruling and won. Although the employee had signed the arbitration agreement; the employer had not. The Fifth Circuit concluded the parties’ arbitration agreement expressly required both parties to sign the agreement and, because the employer failed to sign it, there was no valid arbitration agreement between the parties. While the appellate court recognized signatures are not absolutely required in all cases, the parties must consent to the contract terms and their intentions determine whether signatures are required to bind the parties.
The Fifth Circuit concluded the parties’ agreement indicated an intent for both parties to be bound by the arbitration agreement by signing it. The court reached this conclusion because (i) the agreement contained the statement, “[b]y signing this agreement the parties are giving up any right they may have to sue each other,” (ii) the agreement prohibited any modifications unless they were in writing and signed by all parties, and (iii) the agreement contained a signature block for the employer. These three characteristics are commonplace in dispute resolution provisions, so your policies and agreements could fall prey to the same arguments the former employee made in Huckaba if your company has not countersigned its arbitration agreements.
Because an employer’s carelessness can undermine efforts to enforce policies that are intended to reduce dispute resolution costs, employers should take this opportunity to ensure they have documented their arbitration agreements properly. In doing so, employers also should consider adopting a class and collective action waiver provision to require employees and former employees to arbitrate their disputes on an individual basis. Recently, the U.S. Supreme Court upheld dispute resolution provisions that bar individuals from joining together with others to assert claims against an employer on a classwide or collective basis. These provisions may not be suitable for all companies, but they can significantly affect whether your company will face a claim and, if so, the cost and manner by which any dispute is resolved.
Larry Carbo and Kellen Scott are attorneys at the Houston-based law firm Chamberlain, Hrdlicka, White, Williams & Aughtry. Carbo and Scott routinely counsel companies regarding their employment policies and represent them in employment-related disputes. They can be reached at email@example.com and firstname.lastname@example.org or by calling 713-658-1818.