Overturning an earlier controversial decision, the federal Ninth Circuit Court of Appeals has handed down a major new ruling that strengthens your right to require job applicants to sign mandatory arbitration agreements as a condition of employment.
Employee Balks At Arbitration Provision
The law firm of Luce, Forward, Hamilton & Scripps extended Donald Lagatree a conditional offer of employment for a legal secretary position. On Lagatree’s first day of work, Luce Forward presented him with its standard offer letter, which set forth the terms and conditions of employment, specified his salary and benefits and stated that his employment was at will. The offer letter included an arbitration provision requiring Lagatree to submit all “claims arising from or related to [his] employment” to binding arbitration.
Lagatree told the law firm that the arbitration provision was unfair because it restricted his civil right to go to court. He refused to sign the offer letter, and the firm consequently withdrew its employment offer.
Wrongful Termination Lawsuit Filed
Lagatree filed a claim with the Equal Employment Opportunity Commission, charging that Luce Forward wrongfully terminated his employment for refusing to sign the arbitration agreement. The EEOC then brought a lawsuit on Lagatree’s behalf.
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Employers Can Require Mandatory Arbitration
Now the Ninth Circuit has ruled that employers can require applicants and employees to arbitrate federal discrimination claims—such as for race, gender, disability and age bias—as a condition of their employment. What’s more, the court said that an employer may enforce such arbitration agreements against current employees as long as the agreements comply with traditional principles of contract law. In so ruling, the court said that it was overturning its previous decision barring mandatory arbitration of federal discrimination claims.
The court also rejected Lagatree’s claim that the firm’s withdrawal of its job offer constituted retaliation because his refusal to sign the agreement was a protected activity. The court said that “dickering” over the freely waivable right to a judicial forum is not a protected activity.
Arbitration Agreements Still Controversial
This decision is a big win for employers. But it doesn’t eliminate all of the risk in connection with requiring current employees to sign arbitration agreements as a condition of their continued employment. That’s because it may be difficult to demonstrate that you offered sufficient consideration—such as extra money or benefits that the employee previously wasn’t entitled to—to create a binding agreement. To avoid problems in this situation, it’s still wise to consult an expert before terminating a current employee who balks at signing a mandatory arbitration provision.