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Employer forces arbitration through job application

signingGetting employees to sign early and often may be the key to enforcing mandatory arbitration agreements.

Including an arbitration clause in a job application worked for employer Zachry Industrial when it wanted to compel arbitration of claims arising from its mass layoff of Zachry’s workers at the MeadWestvaco plant in Covington in 2010.

And the March 25 decision enforcing the arbitration clause in Green v. Zachry Industrial Inc. (VLW 014-3-174) may be a Virginia federal court’s first look at a controversial NLRB ruling that allowed some post-layoff claims to stay in federal court.

Teddy A. Green worked for Zachry, a national, privately owned construction and industrial maintenance firm, according to the complaint. Zachry contracted with MeadWestvaco to perform paper mill maintenance work at the Covington plant.

Green began working at the plant on Aug. 3, 2009. On Sept. 29, 2010, Zachry announced its intention to lay off workers at the plant the following day, and the next day, approximately 270 employees were out of a job, according to Green’s complaint.

Green filed a class action lawsuit, alleging the mass layoff violated several federal statutes. Green said there was no 60 days’ advance notice, with attendant wages and benefits, as required by the Worker Adjustment and Notification, or WARN, Act. He also claimed Zachry did not tell the workers about options to continue health insurance coverage as required by the Consolidated Omnibus Budget Reconciliation Act of 1985 and the American Recovery and Reinvestment Act of 2009, and that the employer’s failure to notify a plan administrator violated the Employee Retirement Income Security Act.

When Zachry responded with a motion to compel arbitration, Green cast doubt on the validity of his signature on the written agreement that embodied the employer’s Dispute Resolution Process, or DRP, which included binding arbitration as a final step.

Green said he could not confirm that the signature was his, and the document in question was styled as “Zachry Construction Corporation Dispute Resolution,” while Green worked for Zachry Industrial.

Green had to concede, however, that he had signed an employment application, which articulated in detail the company’s DRP on pages one and two of the application. The application explicitly stated that employment was conditioned on agreement to the DRP.

Having found that Green agreed to the DRP, Roanoke U.S. District Judge Glen E. Conrad turned to a decision by the National Labor Relations Board that Green said would keep his case in federal court.

In 2012, the NLRB said in D.R. Horton Inc. that an agreement similar to the one Green signed violated Sections 7 and 8(a)(1) of the National Labor Relations Act because it required only individual arbitration of employment-related claims. Conrad held Green’s case in abeyance until the 5th Circuit decided an appeal of D.R. Horton. The appellate court reversed the NLRB, effectively giving the Federal Arbitration Act the trump card.

Conrad in turn said the Zachry DRP agreement, with its implied class waiver, could be enforced.

The court also rejected Green’s claim that the arbitration clause was unconscionable. Zachry’s DRP only required Green to pay an initial $150 filing fee if he sought DRP, and it did not require him to give up substantive rights, including attorney’s fees.

Given “that the company bears the brunt of the financial burden when an employee files a claim,” Green failed to show it was “grossly unfair,” the judge said.

And the fact that Green had to agree to DRP in order to get the job did not make the contract one of adhesion, Conrad said. Just arguing that the unemployment rate in Covington was higher than the statewide average was no substitute for evidence about Green’s particular employment prospects, the court concluded.

The broadly worded DRP covered all of Green’s claims, Conrad said.

Green’s ERISA, COBRA and ARRA claims all stemmed from Zachry’s alleged failure to comply with various notification and reporting requirements triggered by the cessation of Green’s employment with the defendant, Conrad wrote.

There still is some dispute among federal courts in the 4th Circuit over whether a case should be stayed or dismissed when a litigant’s claims are subject to arbitration. In light of that uncertainty, the Roanoke judge opted to stay Green’s suit.

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