Enforced At-Will Employee Arbitration Agreements

Friday, June 30, 2006
Contributed by: Kelly Utsinger

Arbitration agreements with at-will employees -- what do you not understand about the word, "enforceable?"

During the first six months of 2006, the Texas Supreme Court has twice reversed lower court decisions that refused to enforce arbitration agreements between employers and their at-will employees. On June 16, 2006, the Court explained, "an employer may enforce an arbitration agreement entered into during an at-will employment relationship if the employee received notice of the employer's arbitration policy and accepted it." In re: Dallas Peterbilt, LTD, L.L.P. 2006 WL 1651694 (Tex), 49 Tex. Sup. Ct. J. 759. Acknowledgement of reading a summary of the arbitration agreement was sufficient to bind the employee to the agreement's terms even if the employee had not actually read the arbitration agreement. Citing its January 27, 2006 decision, In re: Dillard Department Stores, Inc, 186 S.W.3d 514, the Court explained that the "Summary constitutes effective notice because it unequivocally provided [the Plaintiff] with knowledge of the arbitration agreement."

In both Dallas Peterbilt and Dillard, fired Plaintiffs filed suit for defamation. Additional claims were added in Dallas Peterbilt including race discrimination, harassment, retaliation and other tort claims. Both arbitration agreements were sufficiently broad to encompass tort, contract or statutory claims. The claims thus fell within the scope of the agreements. Both agreements were mutual and apparently could not be unilaterally modified by the employer. The employees were bound by these arbitration agreements by accepting employment or by continuing employment.

Having twice addressed the enforceability of at-will employee arbitration agreements within six months, the Texas Supreme Court has reduced the scope of challenges to mandatory arbitration in employment disputes involving at-will employees generally. The clarity of this message may trigger a legislative response.

This column is published for informational purposes only. It should not be construed as legal advice and is not intended to create an attorney client relationship. The views expressed are those of the author and do not necessarily reflect the views of the author's law firm or its individual partners.