• Important New Decision on Arbitration of Employee Claims Issued
  • October 23, 2003 | Author: Laura A. Candris
  • Law Firm: Meyer, Unkovic + Scott llp - Pittsburgh Office
  • On March 13, 2002, the United States Court of Appeals for the Third Circuit issued its opinion in Blair v. Scott Specialty Gases, an important decision for employers which desire to create programs to resolve employee claims and disputes through private arbitration, rather than through lawsuits.

    Blair was employed by Scott in January, 1995 and later promoted to Plant Manager. In February, 1998, Scott placed a mandatory arbitration provision into its employee handbook. Blair signed an "Acknowledgment of Receipt and Reading," stating that she had read the arbitration provision and agreed to submit any disputes arising out of her employment to final and binding arbitration. In March, 1999, Blair resigned, claiming a sexually hostile work environment. After filing charges with the EEOC and PHRC, Blair filed suit. Scott filed a motion to dismiss or for summary judgment, based on the arbitration provision in the handbook. The district court granted summary judgment to Scott, dismissed the case and ordered the parties to proceed with arbitration. Blair appealed.

    On appeal, Blair argued that the arbitration agreement was invalid because Scott hadn't given her anything in exchange for her agreement to arbitrate. The agreement specified that both Blair and Scott would submit any disputes to arbitration. The court declared that "[w]hen both parties have agreed to be bound by arbitration, adequate consideration exists." Blair also argued that the agreement was illusory because Scott retained the ability to alter the agreement unilaterally. This argument was rejected because Scott reserved the right to make material changes only after written notice, which changes Blair could accept or reject by continuing or ending her employment with Scott. Having found that Scott's agreement to arbitrate provided consideration for Blair's agreement, the court did not rule on Blair's argument that continued employment alone was not adequate consideration for the agreement. However, it questioned the validity of such argument.

    The court then considered another argument advanced by Blair, as well as the PHRC and the EEOC, that the agreement was invalid due to a provision requiring Blair to pay one-half of the arbitrator's fees. Blair argued that this requirement posed so great a financial hurdle for her that it interfered with her ability to have her claims heard. The court held that Blair had the initial burden of proof that arbitration would be prohibitively expensive, but that she also had the right to limited discovery in court to establish the facts that would give her the opportunity to prove that the costs of arbitration would effectively deny her a forum to vindicate her statutory rights.

    The Blair decision has two important messages for employers. The first is that employers, if they do so carefully, may create binding arbitration agreements through provisions in their employee handbooks. Second, this decision serves as a caution for employers against making arbitration too expensive for employees.

    Arbitration programs can be an important tool for employers to reduce the costs and delays of proceedings on employee claims in public courts.