Friday, February 20, 2015

Court of Appeals Upholds Agreement to Arbitrate Employment Dispute

Court of Appeals Upholds Agreement to Arbitrate Employment Dispute


In a decision rendered earlier this month by the Kentucky Court of Appeals, it determined that an employee's agreement to arbitrate disputes with his employer would be enforced. Gatliff v. Firestone Industrial Products Company, LLC No. 2013-CA-001568-MR (Ky. App. February 6, 2015). 
Gatliff charged her employer, Firestone Industrial Products Company, LLC, with violation of the Kentucky Civil Rights Act consequent to her termination from employment after completing gender reassignment surgery and allegations of creating a hostile work environment. The suit was initially removed to federal court, but then remanded to the Circuit Court on the basis that the claimed damages were not sufficient to meet the requirements of diversity jurisdiction. Firestone then sought to compel arbitration of the dispute, an effort which Gatliff resisted.

According to the Court of Appeals, Gatliff had agreed to arbitrate all disputes in a series of three separate documents. The first was signed when she applied for a full-time position with Firestone in 1998. Also in 1998, she acknowledged receipt of a copy of the Firestone employee dispute resolution policy, it containing an agreement to arbitrate. She is well, in 2003, signed a document referencing the employee dispute resolution policy and acknowledging that she had had opportunity to review it. Objecting to the enforcement of these agreements against her, Gatliff asserted that (i) no meeting of the minds occurred; (ii) no provision stated that she was waiving her right to a jury trial; (iii) no consideration existed for the 2003 agreement as to the revised employee dispute policy and (iv) the agreement is so unconscionable.
In support of the assertion that no meeting of the minds occurred, Gatliff claimed that “she did not read the plans referred to in the acknowledgments and the acknowledgments did not contain a jury waiver provision." The Court of Appeals rejected this assertion. Rather, the Court found that the documents signed by Gatliff referred to the dispute resolution plan and represented that the signatory acknowledged having had opportunity to review the plan, relying in part on the rule that "a signor to a contract is presumed to know the contents of the contract.”  Slip. Op. at 8 (citation omitted). 
The Court of Appeals stated that arbitration agreements need not contain an explicit waiver of the right to a jury trial as that waiver is an obvious consequence of an agreement arbitrate. As to the argument for a lack of consideration, the court, in reliance upon Spears v. Carhartt, Inc., 215 S.W.3d 1 (Ky. 2006), held that continued employment is itself sufficient consideration to support an agreement to arbitrate. In connection with, the court did not discuss the June, 2014 ruling of the Kentucky Supreme Court in Charles T. Creech, Inc. v. Brown, wherein it was determined that noncompete agreements require consideration to the employee (i.e., something of value) above and beyond continued employment. Seeking to avoid the agreement on the basis that it does not require that arbitration take place in Kentucky (see Ally Cat, LLC v. Chauvin, 274 S.W.3d 451, 455 (Ky. 2009)), the Court of Appeals relied upon the fact that the agreements with Firestone provided that they would be interpreted under the Federal Arbitration Act, and as the Federal Arbitration Act imposes no requirement as to the locale of the arbitration.  Likewise rejected were assertions of substantive unconscionability based on the failure to agree she would be provided a free record of the proceedings and for attorney fees and costs. The Court’s rejection of these challenges is likely dicta in that first the Court found that they were not timely in that they were not raised to the trial court below.

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