Warning: The Danger of Ignoring Employment Arbitration Agreements in Texas

In the 1990s and early 2000s, a huge swath of employers added mandatory arbitration agreements to their employment applications and shoved arbitration agreement forms in front of their current employees. It was part of a larger push for arbitrating disputes with the idea that arbitration is cheaper than litigation. Over the past decade or so many employers have given up pushing arbitration, although many employers still require arbitration agreements. If you believe you have a claim facing arbitration then you should contact a Fort Worth arbitration lawyer or Dallas arbitration lawyer right away.

Arbitration is alternative dispute resolution in which the parties agree to allow a neutral third party to resolve a conflict. The decision of the arbitrator or arbitrators is binding upon the parties, based on an agreement by the parties to be bound, and then the decision can be presented to a court as a binding resolution of the wrongful discharge claim or other employment claims. (For more information about arbitration, see my page about employment arbitration.)

Employment arbitration in Texas

A significant issue in employment arbitration is whether the arbitration agreement is enforceable on the employee. Some employees came up with the idea that they would not sign the employer’s arbitration form (or just purposelessly failed to return the form), thus making the arbitration agreement non-existent. It was a decent idea; especially in a large company where limited HR resources would not be exhausted tracking down missing forms. Some employers came up with their own good idea and that was to make employees automatically covered by the arbitration agreement as a condition of continued employment and require the employee to complete an opt-out form to avoid arbitration. The courts upheld these opt-out arrangements as enforceable; as the Sixth Circuit Court of Appeals recently did in October 2013 in Tillman v. Macy’s Inc..

Facts

Tillman worked for a retail store that was acquired by Macy’s in 2001. When Macy’s acquired the store it implemented its arbitration process on the new store. Macy’s arbitration program automatically covered employees with an opt-out form. Shortly after acquiring the store, Macy’s sent a packet to all employees explaining the process and provided the opt-out form. Tillman denied receiving the packet. In 2006 Tillman attended a mandatory training about the arbitration and received a brochure on the same subject. In 2007 Macy’s sent another brochure by mail. Later that year, Macy’s sent another packet that included the opt-out form. Tillman denied receiving both 2007 mailings.

In 2009 Macy’s terminated Tillman’s employment. She filed suit alleging race discrimination motivated her termination. Macy’s in response filed a motion to compel arbitration, citing Tillman’s failure to opt-out of arbitration. The appellate court, on review of the trial court’s decision, determined that Tillman’s claims not to have received the mailings were insufficient to defeat Macy’s automatic arbitration agreement because she was informed of the process and the opt-out requirement in 2006 and had failed to take any proactive steps to obtain the form and opt-out. The appellate court held that arbitration should occur under Macy’s arbitration program.

The lessons for employees from Tillman are twofold:

1. Employers are increasingly getting support for automatic coverage of employer-favorable policies that require employees to take steps to opt out. Employees need to be careful about understanding the employer’s policies, especially for conflict resolution. Employees should not ignore mailings and other documents from their employers because those documents may include important opt-out forms that are critical to preserve your employment rights, as limited as they may be.

2. Employees should be careful about trying to purposefully dodge signing employer forms. Some employees refuse to sign documents acknowledging attendance at meetings, opt-out forms, opt-in forms, receipt of policy documents and so on. As employers continue to win judicial support for these automatic programs, employees will have to be careful to watch out for forms that combine both acknowledgement statements and bury the opt-out language in the same form.

If you receive an arbitration agreement or opt-out form from your employer then you should have an employment lawyer review the documents before signing. Contact my office today to schedule an appointment to review the forms. Once an employee signs an arbitration agreement it is difficult to contest having your claims heard in arbitration. Even with the help of employment lawyers.

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