Court Compels Arbitration Of Federal Claims Based On “Knowing Agreement” To Arbitrate

The state and federal courts in California continue to closely scrutinize employment arbitration agreements even though they remain a favored means of resolving disputes.  This was evident in the recent case of Ashbey v. Archstone Property Management, in which the U.S. Court of Appeals for the Ninth Circuit held that an employee effectively waived his right to a judicial forum for his Title VII claim and equivalent state-law claims only after engaging in an extensive analysis as to whether the employee entered into a “knowing agreement” to arbitrate.

Michael Ashbey was a regional service manager of Archstone Property Management, Inc. when  he was presented with a Policy Manual containing an arbitration provision.  The Acknowledgement form which he signed stated that it was his responsibility to understand and adhere to the Policy Manual, including the Dispute Resolution Policy, which required that “all disputes between the Employee and the Company [were] to be resolved only by an arbitrator and not by way of a court or jury trial.”  Following his termination the following year, Ashbey brought suit against Archstone for discrimination and retaliation in violation of Title VII of the U.S. Civil Rights Act.

In considering Archstone’s petition to compel arbitration, the court first noted that federal civil rights claims of the kind asserted by Ashbey were not automatically arbitrable under an arbitration agreement.  Rather, Congress stated the arbitration of such claims, as well as other methods of alternative dispute resolution, were encouraged “where appropriate” – which the courts have interpreted as requiring a knowing waiver of the right to a jury trial.

The court then distinguished the case from two others in which the court found the agreements lacked an “express” choice of waiving the right to a jury trial.  In those two cases, Kummetz v. Tech Mold, Inc. and Nelson v. Cyprus Bagdad Copper Corp., arbitration was denied because the employee information booklet and employee handbook given to the employees only stated that they were “guidelines to the Company’s policies and procedures” and that the company could change them as it saw fit.  They did not notify the employees that they contained an arbitration provision, nor did they mention or imply anything about “employment-related disputes, civil rights statutes, or waiver of remedies.”  In contrast, the Archstone Policy Manual expressly did so, and hence constituted a knowing waiver of the employee’s right to sue in court in exchange for their continued employment.

The case highlights the importance of confirming that arbitration agreements contain the kind of language that will ensure their enforcement, as opposed to language that will lead to drawn-out battles over their terms.  If you have any questions about your arbitration policy or are considering adopting a new one, please contact your attorney at AALRR or the author.

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