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Employers May Compel Arbitration Even Where Employee Failed to Sign Arbitration Agreement

In yet another example of the strong federal policy favoring arbitration embodied in the Federal Arbitration Act (FAA), U.S. District Court Judge Joel Slomsky of the Eastern District of Pennsylvania granted employer FC Compassus LLC's motion to compel arbitration in a former employee's discrimination suit.

Suzanne Hoffman, a former employee at FC Compassus, claimed that she was fired after taking medical leave for post-traumatic stress disorder. She alleged that her anxiety disorders were aggravated after a series of acquisitions, which led to increased tensions and disagreements with management.

Ms. Hoffman disputed that she had entered into a valid arbitration agreement with FC Compassus. She argued that she had not read the company's dispute resolution policy and never signed or returned it, which proved that she never intended to agree to arbitrate her employment discrimination claims. Judge Slomsky disagreed. He grounded his decision to compel arbitration in the language of the policy, which put Ms. Hoffman on notice. While not initially mandatory, the policy stated:

If you do not opt out of this Policy within this 14-day period, both you and Compassus will be required to arbitrate all claims and disputes covered by this Policy in accordance with its terms.

After reviewing Pennsylvania contract law concerning "offer, acceptance and consideration" and applying the FAA's presumption favoring arbitration, the court concluded that although Ms. Hoffman did not sign the agreement on the signature page, her acceptance of its terms could be inferred from her failure to opt-out within 14 days outlined in the policy and by her continued employment at FC Compassus. The FAA does not require that an arbitration agreement be signed, only that it be in writing.

Ms. Hoffman further alleged that the policy was unlawful because it restricted her right to an award of attorneys' fees if she were to prevail in arbitration. Again, turning to the policy language, Judge Slomsky noted that Ms. Hoffman was required to pay her own attorneys' fees, "subject to any remedies to which [employee] may later be entitled under applicable law." Therefore, if she were to win on her claims under the Age Discrimination in Employment Act, Americans with Disabilities Act, Family and Medical Leave Act, or Pennsylvania state law, she would be entitled to attorneys' fees and costs. Otherwise, Judge Slomsky found that any remaining ambiguity about the policy should be submitted to an arbitrator.

This case is a textbook example of arbitration agreement enforcement under the FAA. It also underscores the importance of providing a right to opt out of arbitration in employment and consumer arbitration agreements. In addition to acknowledging acceptance of the arbitration agreement if the employee or consumer does not opt out, an opt-out provision defeats a contention that the agreement is procedurally unconscionable because it is a contract of adhesion. Scores of courts have so held.

Copyright © by Ballard Spahr LLPNational Law Review, Volume IX, Number 119


About this Author

Kaplinksy, partner, New York, finance

Alan S. Kaplinsky is Co-Practice Leader of the firm's Consumer Financial Services Group, which has more than 115 lawyers. Mr. Kaplinsky devotes his practice exclusively to counseling financial institutions on bank regulatory and transactional matters, particularly consumer financial services law, and defending financial institutions that have been sued by consumers in individual and class action lawsuits and by government enforcement agencies. Visit Mr. Kaplinsky's profile in Wikipedia.

Mark Levin, Ballard Spahr Law Firm, Litigation Attorney

Mark J. Levin is known for his work in complex commercial, insurance, and class-action litigation, with particular experience in consumer finance litigation, the structuring and enforcement of consumer arbitration clauses, and the defense of insurance companies in class actions. He testified in 2007 for the lending industry before a subcommittee of the U.S. House Judiciary Committee at an oversight hearing on whether mandatory arbitration in consumer contracts is fair to consumers.

Mr. Levin has represented banks in defending against the first private class-action lawsuits under the Federal Trust Indenture Act, nuclear power plant owners in a year-long arbitration against an international insurance consortium, and school districts in a major funding lawsuit to recover state funds. He is currently involved in defending banks, other lending companies, and insurance companies in a wide variety of consumer class actions, including numerous class actions brought under the Pennsylvania Unfair Trade Practices and Consumer Protection Law.

Brain Pedrow, Ballard Spahr law firm, employment, labor, and employee benefit dispute lawyer

Brian D. Pedrow is the Practice Leader of Ballard Spahr's Labor and Employment Group. He represents employers and management in the full scope of matters related to employment, labor, and employee benefit disputes. Mr. Pedrow's practice includes all facets of employment-related litigation, such as discrimination, harassment, retaliation, breach of contract, and employment-based torts. He also has a significant practice representing benefit plans, fiduciaries, and plan sponsors in Employee Retirement Income Security Act (ERISA) litigation arising from benefits eligibility...

Meredith Dante, labor and employment lawyer, Ballard Spahr

Meredith S. Dante represents employers across industries including retail, consumer products, hospitality, financial services, technology, life sciences, health care, manufacturing, and higher education in a broad range of labor and employment disputes. She partners with clients to proactively identify issues and devise legal solutions that are specifically tailored to the client's workforce and business needs. She regularly advises clients in matters involving discrimination, whistleblower complaints and retaliation, wage and hour issues, reductions in force, compliance...

Jessica Federico, attorney, Ballard Spahr Law Firm, Minneapolis, MN

Jessica Federico is dedicated to providing advice to employers who are navigating the challenging and ever-changing landscape of employment law. She counsels employers on defense of discrimination claims, wage and hour disputes, employee termination, internal I-9 audits, and filing petitions for employment-based immigrant and non-immigrant visas.

Prior to law school Jessica worked for several legal services providers in the Twin Cities, assisting immigrants in removal of defense, family based immigration, and humanitarian relief.