Employers can learn from rejected arbitration ­agreement

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Rich Meneghello, BridgeTower Media Newswires

A state court judge in New York recently rejected an employer’s attempt to force an employment claim into arbitration due to a poor choice of wording in the written agreement. The Aug. 7 decision might draw attention because of the employer’s identity – the “Trump for President” campaign organization – but it should be on your radar screen solely because it provides a lesson about the value of carefully drafted employment agreements. Employers across the country ought to sure they don’t fall into the same trap.

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An attempt to sidestep courtroom litigation

Jessica Denson went to work for the Trump for President campaign in August 2016 as a national phone bank administrator. She was quickly promoted to work on Hispanic outreach efforts, but, according to Denson, that advancement was not well-received by all in the organization. She claims that her supervisor – who allegedly overworked her on a routine basis – subjected her to a hostile tirade after the promotion.

Denson claims that the workplace environment was “horrible” through the election, alleging that her supervisors inappropriately tracked her whereabouts and tried to “find dirt on her.” She also claims that she was subjected to cyberbullying and harassment. After the election was over, she filed suit in New York state court, alleging a variety of claims against the campaign.

In response, the campaign asked the court to transfer the case to mandatory arbitration as per the agreement signed by Denson upon hire. The relevant arbitration clause states:

“Without limiting the Company’s … right to commence a lawsuit in a court of competent jurisdiction in the State of New York, any dispute arising under or relating to this agreement may, at the sole discretion of (the employer), be submitted to binding arbitration in the State of New York pursuant to the rules for commercial arbitrations of the American Arbitration Association, and you hereby agree to and will not contest such submissions.”

Denson, acting as her own counsel, resisted the request and asked the court to retain jurisdiction. On Aug. 7, the judge ruled for Denson and rejected the request to move the case to arbitration.

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When words matter: a judge weighs in

Judge Arlene Bluth published a short and to-the-point six-page opinion (first made public via a tweet by Denson on Aug. 16) criticizing the arbitration agreement for being drafted too narrowly. She noted that the arbitration clause confines arbitration only to “any dispute arising under or relating to this agreement.” She observed that “it does not (emphasis used by Bluth) require arbitration for any ‘dispute between the parties’ or even ‘any dispute arising out of plaintiff’s employment.’”

The judge noted that the arbitration clause could have been written to require any disputes arising out of Denson’s employment to go to arbitration, or to force any claims brought by Denson against the campaign into arbitration, but it did not. Instead, the judge said, “the clause is much narrower.”

Bluth pointed to the fact that the agreement between the parties contained a specific list of five prohibited acts restricting Denson’s activities. The agreement barred Denson from: disclosing confidential information, disparaging the campaign, providing services to a competitor, soliciting campaign employees to a competitor, and providing intellectual property to a competitor. Bluth said that she read the agreement to permit the employer to decide whether to file a lawsuit or initiate arbitration against Denson if she were to violate any of these provisions, but no further.

“There is simply no way to construe this arbitration clause in this agreement to prevent plaintiff from pursuing harassment claims in court,” the judge concluded bluntly. For this reason, Bluth denied the employer’s motion to have this case sent to arbitration, and permitted it to proceed for standard pretrial activity.

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Don’t underestimate the value of review

The lesson to learn from this case is simple but cannot be overstated: it is critical for labor and employment law counsel to review and approve arbitration agreements to ensure they are properly worded and in compliance with the law in jurisdictions where one conducts business. There have been significant victories for employers when it comes to the enforceability of arbitration agreements in the recent past. Specifically, the U.S. Supreme Court very recently approved the use of “class waivers” in employment arbitration agreements, permitting employers to short-circuit potentially costly class action litigation in favor of much more manageable individual arbitration proceedings. But victories like these will be for naught if one does not ensure that employment agreements are drafted properly.

Arbitration agreements must clearly spell out which kinds of disputes are to be covered by arbitration. As the judge noted, arbitration agreements should clearly describe what particular matters should be arbitrated in the event a conflict arises, such as “disputes between the parties” or “disputes arising out of the employment relationship.” But remember: specific words matter a great deal, especially in a legal document. If you’re unsure whether your arbitration agreements meet the newest standards set by the Supreme Court and comply with all relevant state laws, or if you need assistance crafting new agreements to capitalize on the latest decisions, be sure to engage the services of a labor and employment attorney.

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Rich Meneghello is a partner in the Portland office of Fisher Phillips, a national firm dedicated to representing employers’ interests in all aspects of workplace law. Contact him at 503-205-8044 or rmeneghello@fisherphillips.com, or follow him on Twitter – @pdxLaborLawyer.

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