Tuesday, October 10, 2006

Two New Employment Arbitration Decisions

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Here's a brief summary of two recent employment arbitration decisions.  A summary of a third arbitration decision -- a particularly important consumer arbitration decision from the Illinois Supreme Court -- will be up shortly.

  • Tenth Circuit Enforces Unilateral-Modification Clause.  An employment arbitration agreement gave the employer the unilateral right to modify the agreement, with three limitations: (1) the employer had to provide ten days notice to employees of the modification, (2) the employer could not modify the agreement with respect to any potential claim or dispute of which it had actual notice, and (3) the employer could not terminate the arbitration agreement with respect to any claim arising prior to the date of termination.  The Tenth Circuit held that while a completely unrestricted right to modify or terminate an employment arbitration agreement would be unenforceable as illusory, the three restrictions in this agreement were sufficient to avoid rendering the arbitration agreement illusory.  The case is Hardin v. First Cash Financial Services, Inc., ___ F.3d ___, 2006 WL 2848087 (10th Cir. 10/6/06).  For a recent article on unilateral-modification clauses in employment agreements, see Michael L. DeMichele & Richard A. Bales, Unilateral-Modification Provisions in Employment Arbitration Agreements.
  • Federal Court in Texas Requires Employee to Arbitrate Tort Claim Against Employer for Workplace Injury.  Texas allows employers to “opt out” of workers’ compensation.  Parco Oilfield Services did so, and established an ERISA Occupational Injury Benefit Plan to cover workplace injuries.  That Plan contained an arbitration clause.  A seventy-year-old roustabout crew leader was injured when electrical cables became entangled in his legs, dragging him into drilling equipment and causing spinal injuries and breaking his leg.  When the Plan denied him benefits, he sued for his injury in tort as well as under the Fair Labor Standards Act.  The United States District Court for the Eastern District of Texas held that the tort claims were subject to arbitration.  The FLSA claims, however, were not covered by the arbitration clause and therefore remained in federal court.  The case is Sosa v. Parco Oilfield Services, Ltd., No. 2:05-CV-153, 2006 WL 2821882 (Westlaw password required).

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