Many companies have adopted programs that call for disputes with their employees to be resolved by an arbitrator, rather than a judge or a jury. The courts (led by the U.S. Supreme Court) have generally supported those programs. At the same time, as a condition of enforcing an arbitration agreement, courts have consistently required that all of the hallmarks of a valid contract be present, including the employee’s acceptance of it. A recent decision by a federal court in St. Louis demonstrates the latitude that judges may give employers in establishing their employees’ agreement to arbitrate claims.
In a case called Karzon v. AT&T, Inc. d/b/a Southwestern Bell Telephone Co., Inc., an employer adopted an arbitration program and notified its workforce through an email with a link to the agreement. The employer gave the employees approximately two months to “opt out” of the arbitration program, and if they did so, they would retain the right to resolve any disputes in court. Any employee who did not opt-out by the deadline, however, was agreeing to arbitrate any future disputes. The employee in this case did not opt-out. When his employment was later terminated, he filed a lawsuit in U.S. District Court for the Eastern District of Missouri, alleging that his discharge was based on his religion and national origin. Relying on the arbitration agreement, the employer asked the court to order that the dispute be resolved by an arbitrator. The employee opposed the employer’s motion, arguing that he had not really “accepted” the arbitration agreement simply by failing to opt-out of the program. The federal court disagreed, holding that an offer may be accepted “by the offeree’s conduct or failure to act.”
This case may suggest that some employers will attempt to increase participation rates in voluntary arbitration programs by using an “opt-out” system, rather than trying to get affirmative signatures from their employees. Note, however, that the court in Karzon was influenced by the employer’s efforts to ensure that employees knew the consequences of inaction. Those steps included the following:
• The employer’s notice to the employees contained the text “REVIEW REQUIRED.”
• Each employee was required to enter his unique username and password to access the arbitration agreement.
• The notice emphasized the deadline for opting out, and it provided a link to opt-out.
• The notice made clear that there would be no adverse consequences for opting out, and it explained the ramifications of failing to opt-out.
• All employees were asked to review the arbitration agreement and click a “Review Completed” button, regardless of whether they decided to opt-out.
In the absence of components by like these, employees may still argue that they did not truly “accept” an arbitration agreement implemented on an “opt-out” basis.