Schneider Wallace Victory Over Forced Arbitration Upheld by 6th Circuit Court of Appeals

On August 4, 2021, the 6th U.S. Circuit Court of Appeals agreed with a lower court ruling that a Schneider Wallace represented gas station employee was not subject to forced arbitration, and that the employee can pursue a wage-and-hour class action in court.

The three-judge panel held unanimously that the Schneider Wallace case can proceed despite the fact that Defendant claimed that it was subject to mandatory arbitration, because the court found that the language in the Newcomb Oil Co LLC’s employee handbook was not enforceable under the Federal Arbitration Act. The District Court in 2018 refused to enforce the employee handbook clause and send the case to arbitration, and Newcomb appealed the ruling.

The court found that the employee handbook language failed to bind the employee to arbitration: “Newcomb and Southard agreed to alternative dispute resolution generally, not arbitration specifically.”

Alternative Dispute Resolution

Alternative Dispute Resolution, as defined by Black’s Law Dictionary and referenced by the Court, is “any procedure for settling a dispute by means other than litigation, as by arbitration or mediation”.

As mediation is a non-binding process, the Court of Appeals agreed with the lower court that this agreement failed to set a final, binding remedy by a third party. Without this binding remedy, no arbitration agreement was in place.

Federal Arbitration Act

The Federal Arbitration Act (FAA), originally signed into law by President Calvin Coolidge in 1925, allows both state and federal courts to resolve disputes through arbitration. Courts have found that the FAA allows for contracts to create compulsory or mandatory binding arbitration, in which the arbitration award replaces a judgement entered in a court. Often, in an arbitration the parties surrender their right to appeal on substantive grounds.

Arbitration, while not defined in the FAA, is defined by some courts as “classic arbitration”, consisting of:

  1. A final binding remedy by a third party (arbitrator).
  2. An independent adjudicator (arbitrator is independent of the parties).
  3. Substantive standards.
  4. Opportunity for both sides to present their case.

If you have a wage-and-hour dispute and are being forced into arbitration contact the attorneys at Schneider Wallace to discuss your case.

Mandatory Arbitration Clause

A mandatory arbitration clause is a contractual clause that purports to force an employee into  arbitration  if a dispute arises.  As stated above, failure of a contract to meet certain standards  can result in the lack of enforceability of the mandatory arbitration clause.

In this case the employee handbook stated:

  1. As a condition of employment, I accept that any complaint or conflict that cannot be resolved internally may be referred to Alternative Dispute Resolution, unless prohibited by law, before any other legal action is taken.
  2. As an employee of Newcomb Oil Co., you agree to Alternative Dispute Resolution a forum or means for resolving disputes, as arbitration or mediation, that exists outside the state or federal judicial system, unless prohibited by law, as a means to resolve any disputes and/or complaints that cannot be resolved internally.
  3. If there is a conflict that cannot be resolved between the employee and the company, both agree that the matter will be referred to mediation.

Schneider Wallace has experienced class action employment attorneys that can review your arbitration clause and any purported waiver of rights an employee handbook or contract claims to impose. Contact us with questions, Schneider Wallace offers free consultations for employment issues.

Employee Wage-and-Hour Class Action Lawyers

If you believe you are not being paid for all of the time you have worked, or are not being paid the overtime due to you, we invite you to schedule a consultation with an employment law attorney in our California, Texas, North Carolina or Puerto Rico offices. Schneider Wallace Cottrell Konecky LLP is a national law firm that represents employees in a wide range of employment law cases, including class action lawsuits involving the failure to pay wages, overtime pay and commissions.