To Institute Arbitration, Employers Must Make Employee Acceptance A Condition Of Continued Employment

On December 15, 2017, the United States District Court for the Eastern District of Michigan issued an opinion reinforcing the principle that an employer may only institute arbitration as a dispute resolution mechanism for existing employees if the employer expressly informs the employee that continued employment is contingent upon the employee's acceptance of the arbitration mechanism. In Cerjanec v. FCA US, LLC, No. 17-10619, 2017 WL 6407337 (E.D. Mich. Dec. 15, 2017), the plaintiffs alleged that an employee-evaluation policy worked a disparate impact on employees aged 55 or older, resulting in missed career advancements, bonuses, and other employment opportunities.

The employer sought to compel arbitration, asserting that the plaintiffs "assented to arbitration when they continued to work at the employer after receiving notice of the arbitration policy." 2017 WL 6407337, at *1. Specifically, the employer argued that those plaintiffs entered into binding agreements to arbitrate when they continued to work for the employer after receiving, in 1995, an Employment Dispute Resolution Process notice (the "EDRP"), stating that non-union employees must submit most employment-related disputes to arbitration. The notice informed employees that "IT APPLIES TO YOU. It will govern all future legal disputes between you and [the employer] that are covered under the Process."

The Court found no merit in the employer's argument that the employees agreed to arbitration simply by remaining employed after receiving the EDRP. The Court found that the EDRP did "not inform employees how the [EDRP] applies to them and does not tell them that it applies to them if they continue to work at [the employer]." Citing the Sixth Circuit in Seawright v. Am. Gen. Fin. Inc., 507 F.3d 967 (6th Cir. 2007), the Court found that the EDRP did not contain any "provision[] that stipulated continued employment would constitute acceptance." Id. at *5. (emphasis added). Considering these facts, and in the "absence of any signed agreement or any [employer]-distributed materials expressly telling Plaintiffs that they would accept the terms of the EDRP by continuing their employment," the Court could not find that the employees agreed to arbitrate. Id. (emphasis added).

Takeaways: Considering the Court's holding in Cerjanec, employers must be mindful of the affirmative steps needed to institute new dispute resolution policies. Merely issuing a notice is insufficient—employers must expressly make the new policy a term of the employees' continued employment. Seawright, 507 F.3d at 971. Only then would a court hold that the employee's "knowing continuation of employment after the effective date of the [new program] constituted acceptance of a valid and enforceable contract . . . ." Id. at 970.

It is worth noting that Cerjanec is a district court case arising out of the Eastern District of Michigan and Seawright is a case out of the Sixth Circuit, which applies to Michigan, Ohio, Kentucky, and Tennessee. As such, the scope of the specifically-cited case law is somewhat limited. This sparks another interesting point: arbitration clause enforcement varies from jurisdiction to jurisdiction. This is yet another reason to ensure skilled employment counsel drafts arbitration provisions in line with the jurisdiction in which they will be enforced.

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