Missouri Court of Appeals holds an employer may not reserve the right to litigate claims against an employee in court while simultaneously restricting the employee to arbitrate her employment claims.January 11, 2021 | Elizabeth Miller
The question of whether an arbitration agreement is enforceable is an oft-disputed issue prone to be volleyed between the courts and an arbitrator; such was the case in Caldwell v. UniFirst Corporation, No. ED108409, 2020 Mo. App. LEXIS 1328 (Ct. App. Oct. 27, 2020).
This case involves a contract within a contract within a contract: a delegation provision contained in an arbitration agreement, which was contained in an employment contract. This not-uncommon scenario requires a court to look at the three contracts and analyze each independent of the others.
In Caldwell, a former at-will employee sued his former employer (UniFirst) under the Missouri Human Rights Act alleging disability discrimination and retaliation claims. UniFirst moved to compel arbitration based on the arbitration clause in Caldwell’s employment contract. UniFirst also asserted the employment contract contained a binding delegation clause that rendered the threshold issue of whether the case was arbitrable a matter to be determined by an arbitrator rather than by the court. The district court denied UniFirst’s motion holding the arbitration clause lacked adequate consideration in two aspects: first, Caldwell’s at-will employment was insufficient consideration to support the arbitration agreement, and second, the arbitration clause lacked mutuality because UniFirst unilaterally reserved for itself the ability to assert certain claims against Caldwell in court while Caldwell was required to arbitrate all potential claims.
The case made its way to the Missouri Supreme Court, which transferred the case back to the Court of Appeals with the direction to reconsider the case in light of the Supreme Court’s decision in Soars v. Easter Seals Midwest, 563 S.W.3d 111 (Mo. banc 2018). In Soars, the court held a delegation clause is severable and should be reviewed independent of any underlying arbitration clause. But in Caldwell, the parties conceded the delegation provision was not at issue, so on reconsideration, the Court held that because the subject delegation provision – standing alone – was valid, the question of whether the arbitration agreement as a whole was valid was for the arbitrator to decide.
Under Missouri law, an arbitration clause requires its own consideration. Accordingly, the arbitrator ruled that while Caldwell’s at-will employment may have supplied sufficient consideration to support the employment agreement, it could not also provide adequate consideration to support the arbitration clause. UniFirst moved to vacate the arbitration order arguing the arbitrator exceeded his power. The trial court denied the motion and affirmed the arbitration order, which UniFirst then appealed.
On appeal, in relevant part, only the question of whether the arbitration agreement was supported by consideration was before the Court. At the outset, the Missouri Court of Appeals (Eastern District) held that Missouri contract law principles – including consideration – govern whether an arbitration agreement is valid. Under Missouri law, a promise by one party to a contract is sufficient consideration in exchange for a promise by the other party. But when one party retains the unilateral right to sidestep its obligations, that party’s promise is considered “illusory” and thus unenforceable. Here, because only one party was bound to arbitrate its claims both the trial court and the Court of Appeals concluded that the arbitration agreement lacked mutuality of promise and therefore lacked consideration. Thus, the arbitration provision was held unenforceable and the arbitrator’s order was affirmed.
A little over a year ago, BSCR published a blog that describes a case in which the Eighth Circuit reminds employers to go back to the basics when administering arbitration clauses. The Eighth Circuit held an employee’s tacit acknowledgement of an arbitration provision by, for example, clicking through the pages of an employment contract on the computer, is not evidence that an employee accepts an arbitration provision contained therein. Last month, Caldwell v. UniFirst Corporation became another example, this time in state court, of the importance of focusing on contracts fundamentals – here, on the language of the arbitration provision itself.The enforceability of an arbitration clause, particularly in the employment context, has become the well-traveled subject of recent litigation. Which begs the question: why all the fuss when so many employers include arbitration clauses, often coupled with delegation clauses, in employment contracts – aren’t these employers well-equipped to draft arbitration clauses and, in fact, don’t the employers intentionally include these provisions for the very purpose of avoiding litigation? In other words, why are employers including and administering these routine provisions in ways that provide employees paths to the courtroom? The simplest explanation is that too many employers don’t know they’re doing it wrong. Notwithstanding these apparent pitfalls, there are relatively simple solutions to tackling arbitration agreement drafting and administration. The BSCR employment & labor law team are willing and able to assist you as you navigate your employment arbitration agreement development and implementation needs.
Supreme Court Bostock Ruling Confirms Scope of Title VII Includes Protections for Homosexuals, Invalidating Prior Eighth Circuit PrecedentAugust 4, 2020 | Brandy Simpson
In Horton v. Midwest Geriatric Mgmt., LLC, Mark Horton filed a Title VII sex discrimination case against Midwest Geriatric Management, LLC (“MGM”) following withdrawal of an employment offer, after Midwest Geriatric Management became aware that Horton was gay and had a partner.
Horton was the Vice President of Sales & Marketing for Celtic Healthcare. He was recruited by a job search firm for the position of Vice President of Sales and Marketing for a company named Midwest Geriatric Management. After applying for the job, he received an offer of employment pending a background check and further confirmation of his educational history. Horton signed the job offer to work for Midwest Geriatric and resigned from his position at Celtic.
Because one of his former colleges no longer existed (it had been sold to another university), the company retained to complete Horton’s background check informed him that the background check would take four to six weeks to complete. Horton communicated this delay to all the parties involved including Midwest Geriatric CEO Judah Bienstock and his wife Faye, who was involved in the hiring process. None voiced any concern. In a subsequent email to Bienstock about the status of obtaining his educational records, Mark stated, “My partner has been on me about [my MBA] since he completed his PHD a while back.” A few days later, Mark received an email stating, “Mark—I regret to inform you that due to the incompletion of the background check of supportive documentation—we have to withdraw our offer letter for employment at MGM. We wish you much luck in your future endeavors. Judah and Faye.” Even after Mark obtained his college records and contacted MGM while the position was still vacant, Faye said, “At this time—we are considering other candidates.”
Horton filed a Charge of Discrimination with the Equal Employment Opportunity Commission, alleging sex discrimination and religious discrimination under Title VII. After receiving his right-to-sue notice from the EEOC, Horton sued in the U.S. District Court for the Eastern District of Missouri.
Horton’s lawsuit alleged Midwest Geriatric unlawfully discriminated against him on the basis of sex when his offer of employment was withdrawn after learning he was homosexual. Specifically, Horton argued: 1) they treated him less favorably because of his sexual orientation, or based on his sex; 2) they treated him less favorably because of his association with a person of a particular sex, i.e. the same sex; and 3) they treated him less favorably on the basis of his nonconformity with sex stereotypes and MGM’s preconceived definition of how males should behave.
In granting Defendant’s motion to dismiss, the District Court relied on the Eighth Circuit’s 1989 holding in Williamson v. A.G. Edwards & Sons that had concluded “Title VII does not prohibit discrimination against homosexuals.” Williamson v. A.G. Edwards & Sons, Inc. 876 F.2d 69, 70 (8th Cir. 1989). The District Court further held that sexual orientation is not an explicitly protected characteristic under Title VII. The Court acknowledged numerous federal courts had recently held otherwise, but noted the Eighth Circuit had not changed its position on the issue, so they were bound by Williamson.
Additionally, because Horton’s claim of sexual stereotyping was admittedly based solely on his sexual orientation, the District Court concluded sexual stereotyping alone could not be the alleged gender non-conforming behavior giving rise to a Title VII claim in Horton’s case, because “[t]o hold otherwise would be contrary to well-settled law that Title VII does not prohibit discrimination on the basis of sexual orientation.”
Horton appealed to the Eighth Circuit, but the appeal was stayed pending the United States Supreme Court’s consideration of the “scope of Title VII’s protections for homosexual and transgender persons,” in Bostock v. Clayton County, and other related cases. In its Bostock ruling, the Supreme Court declared plainly that it “defies” Title VII for “an employer to discriminate against employees for being homosexual or transgender,” because to do so, it “must intentionally discriminate against individual men and women in part because of sex.” The Eighth Circuit therefore reversed, based on the Bostock decision, reasoning that because the Supreme Court has held sexual orientation to be a class protected under Title VII, the Williamson case relied upon by the Eastern District in dismissing Horton’s claim, was no longer good law. The case was remanded to the district court for further proceedings in light of the Bostock holding.
* Kameron Fleming, Summer Law Clerk in the St. Louis office of Baker Sterchi, assisted in the research and drafting of this post. Fleming is a rising 3L student at the Washington University St. Louis School of Law.
In a high-profile and much anticipated ruling, the U.S. Supreme Court held that the prohibition against sex discrimination in Title VII of the Civil Rights Act of 1964 applies to discrimination based on a worker’s sexual orientation or gender identity.
In a 6-3 decision authored by Justice Gorsuch, the Court pointed to the “plain meaning” of the language of Title VII and held that "Because discrimination on the basis of homosexuality or transgender status requires an employer to intentionally treat individual employees differently because of their sex, an employer who intentionally penalizes an employee for being homosexual or transgender also violates Title VII." Justices Kavanaugh, Alito, and Thomas dissented.
The Court reasoned that “Today, we must decide whether an employer can fire someone simply for being homosexual or transgender. The answer is clear. An employer who fires an individual for being homosexual or transgender fires that person for traits or actions it would not have questioned in members of a different sex. Sex plays a necessary and undisguisable role in the decision, exactly what Title VII forbids.”
The decision covered three related cases. It resolves a long brewing split among the federal circuits and affirms a Seventh Circuit ruling allowing a lesbian professor’s wrongful termination lawsuit to move forward. The Justice Department argued against the workers in these cases, in a shift from the previous administration’s position supporting the rights of LGBTQ workers.
The ruling is of particular importance in those states where state civil rights laws have been held not to apply to discrimination based on sexual orientation or gender identity.
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The BSCR Employment & Labor Law 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, Illinois 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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