Recently, in a case of first impression in the Third Circuit, a Delaware bankruptcy judge presiding over an adversary action in the Chapter 11 bankruptcy of Fresh & Easy LLC ruled that a class action waiver in an employment arbitration agreement violates the National Labor Relations Act (NLRA).
Employers tend to like certain aspects of arbitration. Often it provides a faster and more economical resolution to a dispute than litigation. Parties can represent themselves, without the need for counsel, before an impartial decision maker chosen by them. Most arbitrators have some level of experience or expertise in the subject matter of the controversy they will be deciding. Courts and juries generally will have no such experience. Employers also believe that an arbitrator’s economic self interest, the desire to be selected for future cases, will prevent an arbitrator from entering a “runaway jury” size adverse award significantly beyond the actual, documented losses and, where appropriate, prevailing party attorney fees.
In an important win for employers seeking to resolve disputes with former employees outside of the circuit courts, the West Virginia Supreme Court of Appeals recently upheld a circuit court decision that compelled a former employee to submit his wrongful termination dispute to alternative dispute resolution (“ADR”) rather than pursue the claim in court. Although the West Virginia Supreme Court often finds ADR agreements to be unenforceable, it’s important to note why they found this one was acceptable.
As we have reported on this blog before, there has been a trend among employers to adopt mandatory arbitration agreements. For many employers, arbitration is preferred to civil litigation because the process is usually faster and, as a result, tends to be less expensive. In part, this increased use of mandatory arbitration agreements can be attributed to a series of recent decisions by the United States Supreme Court that have reaffirmed the validity of arbitration agreements. West Virginia courts have not always been receptive to arbitration agreements and have found them to be invalid in a variety of contexts, including the employment context. However, this month the Supreme Court of Appeals of West Virginia has issued two important decisions that found arbitration agreements to be valid. The Court’s decision in New v. GameStop, Inc. d/b/a GameStop, No. 12-1371, which upheld an arbitration agreement in the employment context, has important ramifications for all West Virginia employers that use or plan to use arbitration agreements.
West Virginia has joined a majority of states in concluding that an arbitration provision that is part of a larger contract does not require separate consideration if there is adequate consideration for the contract as a whole. The West Virginia Supreme Court of Appeals’ November 2012 opinion in Dan Ryan Builders, Inc. v. Nelson focused on an arbitration provision that required a home purchaser to submit all claims to arbitration, but allowed the home builder/seller to pursue litigation in some instances.
For a long time now, employers have engaged in the practice of entering into arbitration agreements with their employees to arbitrate disputes that may arise during the employment relationship, including wrongful discharge claims stemming from the end of an employment relationship. Although several state courts continue to be hostile towards arbitration agreements, the Supreme Court of the United States has issued a handful of significant decisions in the last few years reminding the states that the Federal Arbitration Act (“FAA”) “declares a national policy favoring arbitration” which will preempt state laws inconsistent with this policy.
Earlier last month, in EQT Corp. v. Miller, the United States District Court for the Northern District of West Virginia provided its most recent guidance regarding the enforceability of alternative-dispute-resolution (“ADR”) agreements subject to the Federal Arbitration Act. Before discussing the court’s conclusion and what it means for employers, some background regarding the case may be helpful.
If the NLRB should prevail in its suit against Boeing, more than an employer’s right to speak the truth plainly may be in jeopardy. It is conceivable that an employer’s right to make fundamental decisions, such as where to locate operations, will be curtailed by this Board. Throughout the complaint, the NLRB’s acting general counsel has requested an order requiring Boeing to operate its second line production of the 787 Dreamliner “in the State of Washington, utilizing supply lines maintained by the [union] in the Seattle, Washington, and Portland, Oregon, area facilities.”