Arbitration clause enforced against housekeeper

A businessman who had his live-in housekeeper sign an arbitration clause when she started work at his house six years ago can use the clause to keep her job-related claims out of court, the Supreme Court of Virginia has ruled.

Even though the arbitration contract called for exclusive use of an arbitration group which was no longer available, the arbitration agreement remained enforceable, the unanimous court said. Parties who want to restrict a judge’s authority to substitute an arbitrator should explicitly say so, the court held.

The lawyer on the losing end of the appeal calls the decision a “stunning victory for powerful folks who seek arbitration as a substitute for the civil justice system.”

Sometime after William Schuiling of Middleburg hired Samantha Harris as his full-time housekeeper in 2007, he had her sign an arbitration contract he used at his business, Brown Automotive Group.

The contract provided that any claims, disputes or controversies arising from the employment relationship “shall be resolved exclusively by arbitration administered by the National Arbitration Forum under its code of procedure then in effect.”

The employment relationship came to an abrupt end in April 2009, according to Harris’ lawsuit in Fairfax Circuit Court. She claimed Schuiling hit her, kicked her and cursed her because she unwittingly accepted service of a witness summons for Schuiling.

Schuiling had hoped to avoid having to testify in an unrelated trial, Harris contended.

When Harris filed suit in 2011, Schuiling argued the case should be in arbitration and asked the judge to appoint a substitute arbitrator, saying NAF was no longer available.

NAF signed a consent order in 2009, agreeing to limit its arbitration practice in the face of a consumer fraud lawsuit filed by the Minnesota attorney general.

Under the language of the Schuiling-Harris agreement, the whole arbitration provision hinged on the availability of NAF, Harris contended. Since NAF was not available, the arbitration provision goes out, she said.

Fairfax Circuit Judge Leslie M. Alden agreed with Harris and refused to compel arbitration, clearing the way for Harris’ tort and contract claims to be heard by a jury. The case went up to the Supreme Court on an interlocutory appeal.

Examining the language of the contract, the court concluded the provision requiring an exclusive arbitrator was severable from the rest of the agreement, leaving intact the basic requirement for arbitration of any claims arising from the employment relationship.

The case is Schuiling v. Harris (VLW 013-6-063).

Writing for the court, Justice William C. Mims pointed to a broadly worded severability clause in the contract. He said the only purpose of the contract was to elect arbitration, so it seemed illogical to have it fail solely because of the failure of one element.

A Virginia statute, Code § 8.01-581.02(A), directs the circuit court to appoint an arbitrator when an arbitration agreement fails to provide for one, and the contract did not include any language limiting the court’s statutory authority, the Supreme Court said.

“Nothing in the Agreement reflects an intention that the statute should not apply,” Mims wrote. If parties want to restrict the court’s power to name an arbitrator, “they must state such an intention in express and unambiguous terms,” he said.

The court reversed Alden’s ruling and sent the case back to Fairfax for appointment of an arbitrator.

John D. McGavin of Fairfax, who represented Schuiling, said there were cases going both ways, and Alden seemed to be concerned about the logistics of determining when the specified arbitrator became “unavailable” and the court’s ability to substitute a different arbitrator.

The decision is “stunning in its reach,” said Douglas B. Wessel of Reston, who represented Harris. He said Harris is being denied the opportunity for discovery and a jury trial because her employer had her sign an arbitration agreement in order to keep her job.

“This guy has rigged the system against her,” Wessel said.

The Supreme Court ignored the dramatic facts alleged in Harris’ lawsuit, as well as the uneven bargaining power of the parties, Wessel said.

“They addressed it wholly as if it were a case about a piece of paper – period. That’s disappointing,” Wessel said. He said the case represents a win for “the powerful against the powerless.”