Dive Brief:
- Employers generally don’t have to countersign an arbitration agreement for it to be enforceable under Texas law, absent any explicit language in the agreement requiring the signature, the 5th U.S. Circuit Court of Appeals held Oct. 6 in Flores v. BJ’s Restaurant Operations Co.
- As part of his onboarding process, a former restaurant employee was given an arbitration agreement to sign before he could start the job, according to court documents. The agreement prohibited collective actions and required employees to individually arbitrate any work-related dispute, the court record said. The employee later brought a class-action lawsuit, alleging BJ’s violated the Fair Labor Standards Act.
- BJ’s sought to compel arbitration. A federal district court found the agreement couldn’t be enforced because BJ’s failed to sign it and the court refused to compel arbitration. On appeal, the 5th Circuit reversed. The Federal Arbitration Act requires courts to enforce a valid arbitration agreement when the dispute falls within its scope, the panel explained. However, state contract law determines whether an arbitration agreement is valid, and under Texas law, contracts — including arbitration agreements — must “clearly and explicitly require a signature” for the signature to be a condition of enforcement, the 5th Circuit said. The circumstances here didn’t meet that standard: The agreement had no signature block for the company, and there was no place for BJ’s to sign it, the panel emphasized.
Dive Insight:
The past two years have been eventful for arbitration agreements, reminding employers and HR professionals to stay on top of legislative and judicial changes potentially affecting their dispute resolution policies.
Last year, the U.S. Supreme Court issued a trio of rulings clarifying the FAA’s scope. One case, Southwest Airlines v. Saxon, may be particularly important for employers whose business involves the transport of goods or people across state lines. That’s because the FAA exempts from its enforcement requirements “contracts of employment of seamen, railroad employees or any other class of workers engaged in foreign or interstate commerce.”
Saxon involved a supervisor of ramp agents who loaded and unloaded cargo on and off planes. The supervisor, who sued the airline for overtime pay, frequently loaded and unloaded cargo herself. In a unanimous ruling, the Supreme Court held that the supervisor’s arbitration agreement with the airline was exempt from the FAA because she fell within the “other class of workers” engaged in interstate commerce.
“To be ‘engaged’ in ‘commerce’ means to be directly involved in transporting goods across state or internation borders,” the high court said. Airline cargo loaders are such a class because they “play a direct and necessary role in the free flow of goods across borders,” the justices explained.
Whether an employee falls within the exemption is determined by the work they perform, the court clarified. So airline ticket agents would not be exempt merely because they work in the transportation industry.
And on Sept. 29, the justices agreed to hear Bissonnette v. LePage Bakeries Park St., which may answer a question left open by Saxon: To be exempt from the FAA, must a class of workers actively engaged in interstate transportation also be employed by a company in the transportation industry?
Legislators have been focused on arbitration in recent months, too. The 2022 Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, spurred by the #MeToo movement, bans forced arbitration for cases of sexual misconduct. Enacted the same year, the Speak Out Act bans pre-dispute nondisclosure and nondisparagement agreements for sexual assault and harassment.
Former Fox News anchor Gretchen Carlson, co-founder of the advocacy group Lift Our Voices, which pushed for the ban, recently told HR Dive the group’s goal is to amend laws against forced arbitration and NDAs until they include every protected class.
Several bills in Congress would further that end. In June, Rep. Nancy Mace, R-S.C., introduced H.R. 4120, the Protecting Older Americans Act of 2023, which would ban mandatory arbitration of claims of age discrimination against individuals aged 40 and older. The bill has been referred to committee. In May, Sen. Cory Booker, D-N.J., introduced S. 1408, Ending Forced Arbitration of Race Discrimination Act of 2023.
Federal agencies have also weighed in on the topic. Last month, U.S. Equal Employment Opportunity Commission released its Strategic Enforcement Plan for 2024-2028, announcing its intention to work to preserve access to the legal system by focusing on overly broad waivers, releases, NDAs and “unlawful, unenforceable, or otherwise improper mandatory arbitration provisions.”
In April, the U.S. Department of Labor led off a blog post discussing a lawsuit with the headline, “Mandatory Arbitration Won’t Stop Us from Enforcing the Law.” The lawsuit involves DOL claims that a Brooklyn healthcare staffing provider allegedly required employees to repay earned wages if they didn’t work for the company for three years. According to the DOL, the company also allegedly required employees to sign contracts forcing those who depart before three years to privately arbitrate their claims and pay its future profits, attorneys’ fees and arbitration costs.
“It’s important to know that workers always have the right to report illegal conduct to the Labor Department or participate in our investigations or litigation, whether or not they have signed arbitration agreements,” DOL said.
