Douglas Ehlke Douglas Ehlke
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Continued Employment Viewed as Worker Acceptance of Employer-Instituted Agreement

March 1, 2008
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In 1999, a Tennessee employer wanted to implement a comprehensive arbitration agreement requiring its employee to pursue arbitration instead of court lawsuits for workplace discrimination, retaliation or harassment disputes or claims.

The company, AGF, called its arbitration initiative the Employee Disput Resolution (EDR) program.

Its human-resources staff introduced the EDR program through a series of announcements and informational meetings. The company first informed employees about the EDR program in the Home Office Bulletin, a publication circulated to all company offices, including the office where the plaintiff, Ms. Seawright, was a branch manager.

In that same time frame, the company mailed letters to its employees informing them that the EDR program would become effective on a future date specified in the letter. Included with the letter was an informational brochure, which stated:

“The AGF Employee Dispute Resolution is the sole means of resolving employment-related disputes between you and the company or you and another employee, including disputes for legally protected rights such as freedom from discrimination, retaliation or harassment, unless otherwise prohibited by law.

“You are still free to consult or file a complaint with any appropriate state or federal agency, such as the EEOC, regarding your legally protected rights. However, the program must be used instead of a trial if you are not satisfied with the results of the government-agency process, unless otherwise prohibited by law. Seeking, accepting or continuing employment with AGF means that you agree to resolve employment-related claims against the company or another employee through this process instead of through the court system.” 

The company then held group informational meetings explaining the program. A pamphlet distributed to employees during the meetings repeated the information outlined above. Seawright signed an attendance sheet acknowledging that she had attended the informational session and received a copy of the EDR pamphlet. The program went into effect and Seawright remained an employee for the next six years.

Two years after the program went into effect, the company mailed its employees a letter reminding them that the EDR program was still in effect and explained how to locate additional program information on the company’s intranet website. The letter included a brochure summarizing the program, similar to the other two brochures that had been distributed by mail and at the informational meetings. It included the same three paragraphs regarding the binding nature of the arbitration agreement and reiterated that “seeking, accepting or continuing employment with AGF means that you agree to resolve employment-related claims against the company or another employee through this process instead of through the court system.” 

Then in April 2005, Seawright was terminated and filed a civil lawsuit alleging discrimination under state law and alleging a violation of the Federal Family and Medical Leave Act (FMLA). The company filed a motion to suspend the civil court proceedings and to compel the case to go instead to arbitration, relying upon its EDR program instituted. Seawright opposed that motion to compel arbitration and argued that:
  1. 1) She did not assent to the EDR program and that there was no bargained-for exchange;
2) She did not enter into a written agreement as required by the Federal Arbitration Act, and
  1. 3) In the alternative, the arbitration agreement is void because it is a contract of adhesion or unconscionable.
The Federal Arbitration Act (FAA) provides:

“A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing, to submit to arbitration for an existing controversy arising out of such a contract, transaction or refusal, shall be valid, irrevocable and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”

The U.S. Court of Appeals for the Sixth Circuit (Kentucky, Michigan, Ohio and Tennessee) cited other cases to characterize this FAA law to embody the national policy favoring arbitration and places arbitration agreements on equal footing with all other contracts, reflecting the liberal federal policy favoring arbitration agreements.

The court saw the key issue as one of employee assent to this new arbitration agreement or contract; namely, did the employee’s continued employment with the company constitute assent? 

Under Tennessee State contract law, unilateral contracts are valid where acceptance is indicated by action under the contract. The court determined that continued employment can constitute acceptance.

The Appeals Court rejected all of the ex-employee’s objections to the arbitration agreement, finding that assents by continued employment and the company’s written notices and communication meetings constituted sufficient and reasonable notice of the new arbitration requirement. In the court’s words:

“The written materials accompanying the arbitration agreement clearly stated that continued employment after the effective date of the EDR program would constitute the employee’s acceptance of the agreement to arbitrate. Thus, under Tennessee law, Seawright expressed a valid assent when she continued to work for the company.

“The employer at issue here did not try to hide its mandatory arbitration policy nor try to trick its employees into agreeing to the policy. Nor did the employer choose an arbitration forum that would discourage employees from submitting disputes or favor the employer in the resolution of those disputes. In the absence of evidence that assent to the arbitration agreement was procured though unfair means or that the agreement itself was substantively unfair, courts should enforce mandatory arbitration agreements on the same basis as any other agreement that employers require as a condition of employment. Seawright has failed to demonstrate any state grounds upon which the agreement might be void or unenforceable and has failed to demonstrate the agreement did not comply with the ‘written’ requirement of the FAA.” MF

Industry-Related Terms: Case, Void
View Glossary of Metalforming Terms

Technologies: Management

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