• Employee Compelled to Arbitrate Discrimination Claims Where He Failed to "Opt-Out" of Employer's Arbitration Program
  • July 27, 2009 | Author: Brian M. Molinari
  • Law Firm: Epstein Becker & Green, P.C. - New York Office
  • In a case that is sure to remind Plaintiff's attorneys to read the fine print twice in all of their client's employee handbooks and agreements before filing suit in court, the U.S. District Court of the Southern District of New York recently compelled an employee-plaintiff to arbitrate his discrimination and tort claims against his employer, the Four Seasons Hotel, because he failed to affirmatively "opt-out" of the Four Seasons' internal mediation/arbitration program. See Rodriguez v. Four Seasons Hotels, Ltd., No. 09-2864 (DLC) (S.D.N.Y. July 10, 2009) .

    Rodriguez, who is still employed as an Assistant Manager for the Four Seasons Hotel in New York, claims that Four Seasons discriminated against him on the basis of his race, color, sex, and national origin when he was denied promotions and was required to train white, female employees who were then promoted over him. Under the Four Seasons' "Complaint, Arbitration & Review for Employees" (C.A.R.E.) program, however, Rodriguez agreed that if he was ever dissatisfied with the general manager's written decision at a previous step in the C.A.R.E. process, and the complaint was based on, inter alia, employment discrimination or harassment then he "must submit [his] complaint to be heard by an independent mediator/arbitrator unless [the employee] has chosen to opt out of the mediation/arbitration provisions by following the opt-out procedure."

    Rodriguez admittedly declined to opt-out of C.A.R.E., and attempted to argue that the C.A.R.E. program was unenforceable.

    District Judge Denise Cote held that C.A.R.E., contained in the parties' employment "contract" called EmPact, was enforceable pursuant to the Federal Arbitration Act (FAA) because it was unambiguously a private agreement to arbitrate the claims asserted by Rodriguez. Noting that the FAA "was designed to ensure judicial enforcement of privately made agreements to arbitrate," unless Rodriguez opted-out, the court held that he remained contractually bound to arbitrate:

    [Rodriguez was] not required to submit to the offending mediation/arbitration provisions as a condition of employment, but was provided with the choice of opting-out. Having declined to opt out, Rodriguez is required by the terms of his signed and valid employment contract to arbitrate his claims.

    As Rodriguez's federal discrimination claims were plainly arbitrable, 14 Penn Plaza LLC v. Pyett, 129 S. Ct. 1456, 1469 (2009), and courts regularly enforce arbitration agreements in the employment discrimination context, Judge Cote held that the FAA compelled arbitration. The state discrimination and tort claims were also arbitrable as they were covered by the scope of arbitrable claims under C.A.R.E. and arose from the same set of facts as the federal discrimination claims.

    I find it interesting that Judge Cote repeatedly emphasized that the agreement to arbitrate in this case was in the form of a specific "contract" agreed to by Rodriguez (the "EmPact" document) and that he was free to opt-out; however, as the court implicitly recognized by citing Nunez v. Citibank, 2009 Lexis 7783 (S.D.N.Y. Feb. 3, 2009) , and Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001), mandatory agreements to arbitrate may properly be contained in other documents that are perhaps not expressly denominated as a "contract" but carry binding obligations, e.g., employment applications, other employment agreements, and employee handbooks so long as the document is a valid agreement that wasn't procured by fraud or some other unlawful conduct.

    Interestingly, by opting out, Four Seasons employees would automatically become ineligible for "No-Fault Separation Pay" associated with a permanent layoff or no-fault termination. However, it does not appear that Rodriguez ever argued that such a penalty operated to make the agreement unconscionable on the ground that he might unfairly be left with a Hobson's choice. Judge Cote seemed to preempt any unconscionability argument by noting that Rodriguez was not unsophisticated as he held a Bachelors and Masters degree and freely and knowingly signed the agreement.

    In sum, with a strong imprimatur of enforceability by a highly respected federal judge, Four Seasons' EmPact/C.A.R.E. opt-out themed arbitration provisions may provide useful guidance for employers and their counsel in reviewing their employee arbitration agreements.

    Caveat: keep your eyes on the progress of the Arbitration Fairness Act of 2009 (H.R. 1020 and S.931) introduced by U.S. Congressman Hank Johnson and also by U.S. Senator Russ Feingold. If enacted into law, the AFA would amend the FAA to declare unenforceable and void any pre-dispute agreement that requires arbitration of employment, consumer, or franchise disputes, or a dispute arising under any statute intended to protect civil rights. Collective bargaining agreements are exempt. A prior, virtually similar version of this Act, the AFA of 2007, died in committee during the last congressional session.