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Employment Law Blog Legal updates, news, and commentary from the attorneys of Baker Sterchi Cowden & Rice LLC

Choice of Venue Provision Upheld in Employment Contract

December 28, 2017 | Robert Chandler

After Reilly Company terminated his employment, Plaintiff Jeff Reed brought claims against Reilly in Jackson County, Missouri Circuit Court. Reilly moved to dismiss the claims based upon an employment contract provision stating that all disputes between the parties calling for interpretation and enforcement of the contract must be brought in Johnson County, Kansas.  Plaintiff argued that: (1) because he was not seeking to enforce the contract, the forum selection provision had no applicability to his common-law and statutory tort claims, (2) the forum selection clause, and the contract as a whole, were unenforceable because his employment was “at-will” and no additional consideration was given for the forum selection clause, and, finally, (3) the forum selection clause was unfair and unreasonable because it was procured by fraud and concealment and therefore unenforceable.  The dismissal was affirmed by the Court of Appeals, and the Supreme Court affirmed, rejecting all of plaintiff’s arguments.

Facts

Reed sued in Missouri, seeking declaratory and injunctive relief based on his employment contract with Reilly, damages for alleged fraud including a Missouri Merchandising Practices Act claim of fraud in procuring the contract, and damages for wrongfully withholding commissions.  Reilly moved to dismiss the claims, asserting that Reed’s lawsuit could only be brought in Johnson County, Kansas.  The motion to dismiss was granted, and the Court of Appeals further affirmed the validity and enforcement of the forum selection clause.  The Missouri Supreme Court accepted the case for review.

The Forum Selection Clause Was Enforceable Despite Allegations of Non-Contract Disputes

Reed argued that the trial court erred in enforcing the forum selection clause in the employment contract because the contract lacked precise language requiring him to bring his non-contract claims in Kansas.  The provision at issue stated: 

“In the event of a dispute, jurisdiction and venue to interpret and enforce any and all terms of the Agreement shall be the District Court of Johnson County, KS.”

The Court ruled that whether a forum selection clause applicable to contract actions also reaches non-contract claims depends upon whether resolution of the claims is dependent upon interpretation of the contract.  The resolution of plaintiff’s claims in this matter necessarily required an inquiry into the terms and enforceability of the employment contract, and accordingly, the non-contract claims were subject to the forum selection clause.  Plaintiff’s claims for injunctive and declaratory relief clearly sought determinations regarding the enforcement and validity of the contract as a whole, and therefore the forum selection clause was enforceable.

The Trial Court Was Not Required to Determine Whether the Employment Contract Was Wholly Enforceable and Supported By Appropriate Consideration, Before Ruling on the Forum Selection Provision

The Supreme Court held that the trial court was not required to determine whether the contract was valid and enforceable, before ruling on the enforceability of the forum selection clause.  Such a determination would be absurd, particularly if the matter was sent to a different jurisdiction for the same analysis to be conducted.  Also, assuming that additional consideration was required in exchange for the forum selection clause and no additional consideration was given by Reilly, as long as the contract terms were not arrived at under terms deemed “adhesive” the forum selection clause would be enforceable.  Plaintiff Reed did not argue that the contract was adhesive.

Because resolution of Reed’s arguments that (1) at-will employment does not create an enforceable employment relationship and (2) Reilly breached the agreement were issues that could be addressed in the new venue, they did not void the forum selection provision.

The Forum Selection Clause Was Not Void Due to Unfairness, Fraud, or Misrepresentation.

The Court rejected Plaintiff’s assertion that the forum selection clause was void because the employment agreement, as a whole, was void due to fraud.  Although a forum selection clause may be voided if procured by fraud, there was no evidence in the record concerning negotiation of the forum selection provision, and plaintiff’s arguments that the employment agreement was procured by fraud did not void the forum selection clause because plaintiff did not argue that the forum selection clause was specifically procured by fraud.

The Court likewise rejected plaintiff’s argument that the forum selection clause was unfair and unreasonable, because there was no evidence submitted that the contract was adhesive.  Finally, the Court found that the chosen venue in the contract was a neutral forum for the parties’ dispute which cut against plaintiff’s fairness and reasonableness arguments.

Conclusion

Forum selection clauses that are not adhesive will be interpreted independently of the court’s determination of the enforceability and validity of the contract as a whole.  When, as in this case, a contract specifies a forum for all disputes concerning the contract’s interpretation and enforcement, and the dispute between the parties involves those matters, the forum clause will be enforced.  Parties drafting forum selection clauses should exercise care to avoid contracts that are adhesive – i.e. agreements reached without a realistic opportunity for bargaining – and to choose forums which will be considered “neutral” and not overly advantageous to the party drafting the agreement.

Related Services: Employment & Labor

Attorneys: Robert Chandler

Gender Stereotypes Now Serve as a Basis for Sex Discrimination Claim under the MHRA

December 18, 2017 | Melesa Johnson

Despite an uptick in advocacy, support, and inclusion of the LGTBQ community over the past several decades, as of today, discrimination based on sexual orientation remains an invalid claim under the Missouri Human Rights Act (“MHRA”). However, in a recent decision by the Western District of the Missouri Court of Appeals, disparate treatment of a gay male employee because he did not conform to traditional or stereotypical notions of masculinity warranted a claim of sex discrimination; which is a cognizable claim under the MHRA.

In Lampley, et al. v. Missouri Commission on Human Rights, plaintiff Lampley alleged that his employer discriminated against him based on sex because his behavior and appearance deviated from the stereotypes of “maleness” held by his employer and managers. Lampley claimed the stereotypes surrounding masculinity encouraged his employer to harass him and treat him differently from similarly situated employees who conformed to gender stereotypes. Subsequently, a close friend and co-worker of Lampley’s named Frost also filed charges with the alleging retaliation based on her close association and support of Lampley. The two employees “dual-filed” their charges of discrimination with both the EEOC and the Missouri Commission on Human Rights.  The MCHR dismissed the state administrative proceedings, stating it lacked jurisdiction over the claims because they were based on sexual orientation. Both complainants then petitioned the trial court for administrative review arguing that sex, and not sexual orientation, serves as the basis of their claims. The trial court consolidated the cases and granted summary judgement in favor of the MCHR.

On appeal, Lampley and Frost argued that the trial court erroneously construed their claims to be based on sexual orientation, while in fact, they were based on sex, and therefore actionable under the MHRA. Lampley and Frost further contented that the sex discrimination was based upon sex stereotyping. The Missouri Court of Appeals agreed.  Relying on federal case law under Title VII, the Court held that sex stereotyping can form the basis of a sex discrimination claim allowable under the MHRA. The Court of Appeals also cited R.M.A. v. Blue Springs R-IV School Dist., another recent Missouri Court of Appeals decision, which held “discrimination on the basis of sex means the deprivation of one sex of a right or privilege afforded the other sex, including a deprivation based on a trait unique to one sex, or a deprivation based on traits perceived as unique to one sex.”

In sum, the Court held that under the MHRA, “evidence an employee has suffered an adverse employment decision based on stereotyped ideas of how a member of the employee’s sex should act can support an inference of unlawful sex discrimination.” Thus, employers must be wary of company managers who might try to dictate what is masculine or feminine enough to meet accepted company norms. Just like ideas of gender identity have become more fluid and inclusive over the years, so has the applicable law. 

Court of Appeals Affirms that At-Will Employment Is Not Sufficient Consideration for an Arbitration Agreement, Refuses to Change Law

December 14, 2017 | Robert Chandler

In Wilder v. John Youngblood Motors, Inc., the trial court had denied the employer’s motion to compel arbitration of its former employee’s claim for wrongful termination, and the employer appealed. The Circuit Court ruled that at-will employment was the only consideration given for the agreement to arbitrate, and Youngblood therefore failed to demonstrate sufficient consideration for the agreement between the parties to arbitrate.  Youngblood subsequently appealed this ruling arguing that mutual consideration between the parties existed, and, regardless, the Court should find that at-will employment is sufficient consideration for an agreement to arbitrate in accordance with federal policy favoring arbitration agreements and a tension in Missouri law providing that at-will employment provides sufficient consideration for non-arbitration provisions.  The Court of Appeals affirmed the Circuit Court’s ruling.

Facts

Plaintiff Stephanie Wilder filed a Petition alleging wrongful termination for reporting alleged wire fraud by her employer, Youngblood.  Wilder was an at-will employer, but at the time of hiring she executed an “Agreement for Binding Arbitration” as a condition of her employment.  The Agreement bound Wilder and Youngblood to pursue arbitrations to resolve any claims or disputes arising in the course of her employment, with some exceptions.

Wilder worked for Youngblood for approximately 18 months but was terminated after reporting alleged wire fraud by Youngblood.  Wilder subsequently filed her lawsuit for wrongful termination and Youngblood filed an answer and motion to compel arbitration, citing the Agreement.  Wilder argued that the Agreement was “unconscionable,” lacked consideration and was therefore unenforceable.  Youngblood subsequently appealed.

The Arbitration Agreement Lacked Mutuality of Consideration

Youngblood argued that the trial court erred in denying its motion to compel arbitration because the Agreement was properly supported by mutual consideration.  The Court of Appeals sided with the Circuit Court’s assessment that at-will employment is insufficient consideration for the Agreement.

Additionally, the Court of Appeals agreed with the Circuit Court’s finding of a lack of mutuality with respect to the claims that were exempted from arbitration.  Employer Youngblood had the opportunity to exempt certain potential claims from arbitration (“breach of trust, use or dissemination of confidential information, unfair completion, disclosure, or use of trade secrets”), but Wilder was prohibited from avoiding arbitration except where arbitration was forbidden by law. The Court noted that claims for unemployment benefits and workers’ compensation benefits, exempted from arbitration under the Agreement, were areas already prohibited from arbitration by law as jurisdiction for these areas is vested with specialized administrative tribunals.

The Court was not swayed by Youngblood’s argument that, as consideration for the Agreement, it was foregoing its ability to bring common law tort claims.  The Court noted that Youngblood, in bringing the causes exempted from arbitration in the Agreement, could also bring these common law claims in the event they “relate” to the potential claims exempted from arbitration.  Wilder did not have the same opportunity, and therefore mutual consideration was absent.

Youngblood also pointed to conditioning Wilder’s employment upon execution of the Agreement, a provision in the Agreement calling for it to pay the costs of arbitration if invoked, and Wilder’s continued employment and salary all as independent consideration sufficient to meet the mutuality requirement.  The Court rejected all three arguments:  1) reiterating that at-will employment is insufficient consideration for an agreement to arbitrate, 2) the agreement to pay arbitration costs was obviated by a provision calling for costs to be awarded to the prevailing party, and, 3) although continued employment could be sufficient consideration for a restrictive covenant such as an agreement not compete, agreements to arbitrate are fundamentally different restrictive covenants, and enforced differently.

Accordingly, the Court found Youngblood’s arguments on mutual consideration unavailing and affirmed the Circuit Court’s ruling denying the motion to arbitrate.

The Court Refused Youngblood’s Federal Policy Argument

Youngblood pointed out that at-will employment was sufficient consideration in some employment agreements, but, under Missouri law is insufficient for arbitration agreements.  Youngblood argued that, because at-will employment is sufficient consideration for non-arbitration provisions, Missouri law should be changed to allow at-will employment to be sufficient consideration for arbitration agreements as well.  The Court refused to change the law, noting that the Court of Appeals should not “make the law” but should only “correct errors” and an argument to change the law should be addressed to the Supreme Court.

Conclusion

Agreements to arbitrate based upon at-will employment will continue to be found unenforceable by the Court as lacking sufficient consideration despite at-will employment providing sufficient consideration for other non-arbitration provisions.  This tension in Missouri contract law is notable.

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About Employment Law Blog

The BSCR Employment Blog examines topics and developments of interest to employers, Human Resources professionals, and others with an interest in recent legal developments concerning the workplace. This blog will focus on Missouri and Kansas law, and on major developments under federal law, and at the EEOC and NLRB.  Learn more about the editor, David M. Eisenberg, and our Employment & Labor  practice.

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