Top Maryland Court Orders Arbitration Despite Employer's Unilateral Right to Alter Arbitration Rules

The Maryland Court of Appeals yesterday ordered arbitration in an employment case over the employee's objection that the the employer's contractual right to alter the arbitration rules at any time rendered the contract unenforceable for lack of consideration.  The court held that consideration existed because the employer, Circuit City, had agreed that (1) alterations or rescisions would occur only on December 31 of every year, (2) alterations or rescisions would be prospective only, and (3) it would give employees at least 30 days notice of any alterations or rescisions.  The court distinguished an earlier case in which it had ruled that consideration did not exist where an employer retained the unilateral right to rescind the arbitration agreement without notice.

Courts are split over whether an employer's retention of a unilateral-right-to-modify renders an arbitration agreement unenforceable.  For a discussion of the approaches courts have taken and a list of cases, see Contract Formation Issues in Employment Arbitration at 450-52.

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