The Eighth Circuit has issued a reminder to those seeking to bind employees and consumers to arbitrate future disagreements: don’t gloss over contract basics.
In Shockley v. PrimeLending, 929 F.3d 1012, Jennifer Shockley sued her former employer under the Fair Labor Standards Act, alleging she was not paid for all earned wages and overtime pay. PrimeLending moved the district court to compel arbitration based on a mandatory arbitration provision contained in its employee handbook. The district court denied the motion because it found no agreement to arbitrate existed between Shockley and the company. PrimeLending appealed the denial to the Eighth Circuit, which affirmed the district court’s denial for the same reason.
The Court reiterated in the Shockley opinion that arbitration agreements are favored by federal law and are enforced as long as the agreements are valid, and the dispute at issue falls within the scope of the agreement. Whether parties can be compelled to arbitrate any given dispute is a matter of contract law. Thus, while arbitration is preferred, parties may only be compelled to arbitrate if they contractually agreed to be bound by arbitration. A party seeking to compel arbitration must therefore show, as a threshold matter, that a valid and enforceable agreement to arbitrate exists. To do so, the three elements of a contract – offer, acceptance, and consideration – must be proven.
Like most large employers today, PrimeLending made its employee handbook accessible electronically, and as part of Shockley’s required annual policy review, the click of a mouse on the handbook in PrimeLending’s computer network automatically generated an acknowledgement of review. PrimeLending employed Shockley for 13 months. In that time, Shockley completed the policy review process twice. PrimeLending claimed the two e-acknowledgments and Shockley’s continued employment with the company were sufficient to carry its burden to prove Shockley accepted the arbitration provisions contained in the handbook. Both the district court and the Eighth Circuit held these facts were insufficient to prove Shockley accepted any purported offer related to arbitration.
The employment handbook contained two arbitration-related provisions: (1) a “delegation provision”, and (2) a run-of-the-mill arbitration provision. A delegation provision is an agreement to arbitrate threshold issues concerning the arbitration agreement, mainly placing “gateway questions of arbitrability into the hands of an arbitrator.” In other words, a delegation provision is a separate agreement within the agreement to arbitrate, which, if valid, mandates that certain issues be determined by an arbitrator rather than by a judge before the core dispute is arbitrated. When successful, the challenge of a delegation provision renders the remainder of an arbitration agreement open to review by the courts. Accordingly, the Eighth Circuit in Shockley first reviewed the delegation provision contained in the handbook.
The Eighth Circuit assumed, for the sake of discussion, that the delegation provision at issue constituted an offer. And it then reviewed the record to determine whether Shockley accepted the purported offer. Under Missouri law, “mere continuation of employment [does not] manifest the necessary assent to [the] terms of arbitration.” While continued employment may in some circumstances constitute acceptance when the employer informs all employees that continued employment constitutes acceptance, no such message was relayed to PrimeLending employees. Thus, Shockley’s continued employment was not evidence that she accepted the delegation offer contained in the employee handbook. Next, the Court entertained the e-acknowledgments as means of Shockley’s acceptance.
Specifically, the Court explained that acceptance is present when the offeree (here, Shockley) – the person receiving the offer – signifies assent in a “positive and unambiguous” manner generally by affirmative words or action to the terms of the offer. The Court outlined the pertinent facts: Shockley’s initial review of the handbook was not conditioned on her offer of employment, she had no memory of reviewing the handbook, nor did the record establish she actually reviewed the handbook. The Court held that PrimeLending could, at best, show Shockley acknowledged the existence of the arbitration provisions and was thus aware of the terms of her then-employer’s purported contract offer. The Court held that Shockley’s review of the handbook and the subsequent system-generated acknowledgment did not create clear acceptance and therefore no contract was created.
Following review of the delegation provision, the Court turned its attention to the arbitration provision. Because both the delegation and arbitration provisions are grounded in contracts law and involve the same set of facts, the Court succinctly explained that the legal analysis of the arbitration provision was the same as analysis of the delegation provision, and that both analyses suffered from the same fatal flaw. The fact that the Court could not find that Shockley accepted any purported offer was dispositive of both analyses. Thus, PrimeLending failed to meet its burden to prove a valid agreement to arbitrate existed and the Court could not compel Shockley to arbitrate her claims.
The lesson for businesses seeking to compel arbitration of employee or consumer claims is clear: the “offeree” of the arbitration clause should be asked, in the first instance, to affirmatively accept the arbitration clause.
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Attorneys: Elizabeth Miller
The Americans with Disabilities Act (“ADA”) prohibits employers from discriminating against a qualified individual on the basis of a disability. In 2008, Congress amended the ADA, to ensure that the ADA’s definition of disability was construed broadly. The amendment added a “regarded as” disabled component, meaning that applicants and employees who cannot prove that they have an actual disability within the meaning of the ADA may still be able to show that their employer regarded them as having such a disability. This broader reading provides obese plaintiffs a greater opportunity for success in disability discrimination claims; however, this amendment has created differences in interpretation regarding the extent to which obesity is considered a disability under the ADA.
The Seventh Circuit is the Fourth Federal Appeals Court to Hold That Obesity, Alone, is Not a Protected Disability Under the ADA.
On June 12, 2019, the Seventh Circuit Court of Appeals joined the Second, Sixth, and Eighth Circuits holding obesity must be the result of an underlying physiological disorder to qualify as a disability under the ADA in the case of Richardson v. Chicago Transit Authority. In Richardson the plaintiff, a bus driver who weighed over 400 pounds took medical leave due to hypertension and influenza. After he resolved the medical issues and was deemed fit to return to work, his employer required him to take an assessment because the bus seats were not designed to accommodate drivers over 400 pounds. The assessment determined that the plaintiff could not make hand-over-hand turns, he simultaneously used both of his feet on the gas and brake pedals, and he rested his leg near the door handle. His employer transferred him because of safety concerns regarding his operation of the equipment in question. He sued under the ADA, claiming that he should be “regarded as” disabled due to his obesity. The Seventh Circuit affirmed summary judgment for the employer. The court determined that under the ADA, the plaintiff must allege that he suffers from a medical impairment, and that obesity is a physical characteristic -- not an impairment -- and should not be regarded as an impairment.
The Second, Sixth, Eighth, and now Seventh Circuit Courts are applying what they consider a “natural reading” of the EEOC’s interpretative guidance. This reading concludes that physical characteristics, such as obesity, that are not the result of a physiological disorder do not qualify as a disability under the ADA. The opinion in Richardson suggests that if claims for obesity without an underlying physiological condition are allowed, interpretation of what could be “regarded as” a disability would become overly broad and open the court to results that are inconsistent with the ADA’s text and purpose, including potential claims for weight-based claims from individuals with weight slightly outside of a normal range without any physiological basis as the cause, and making the “regarded as” amendment a catch-all for discrimination based on appearance, size, and more, none of which are disabilities the ADA was designed to protect.
What Are Other Jurisdictions Saying?
In the First Circuit case of Cook v. State of R.I., Dept. of Mental Health, Retardation, & Hosps., the First Circuit held that obesity, by itself, should be protected without evidence of an underlying physiological disease or disorder. The Court took the position that the issue is a question of fact for a jury to decide.
Likewise, although the Fifth Circuit has not directly ruled on this issue, a case arising in the U.S. District Court for the Eastern District of Louisiana, a federal trial court within the Fifth Circuit, EEOC v. Res. for Human Dev., Inc., held that severe obesity can be a disability under the ADA, without evidence of an underlying physiological disorder.
Lastly, a 2018 Ninth Circuit case, Taylor v. Burlington N.R.R. Holdings, Inc., arising under Washington’s state anti-discrimination law, involved a plaintiff who was rejected for a job because he was considered outside of the company’s weight standards for the position. The Court certified to the Washington Supreme Court for guidance the question of under which circumstances obesity qualified as an impairment under the state law. Interestingly, although not arising under the ADA, the EEOC filed a brief in the case, arguing that weight is not an impairment when it is within the “normal” range and lacks a physiological cause, but may be an impairment when it is either outside the “normal” range or occurs as the result of a physiological disorder. The Ninth Circuit acknowledges that whether obesity is to be “regarded as” a disability under the ADA remains an open question in that jurisdiction. The Washington Supreme Court responded this year that obesity is an impairment under the Washington law.
Guidance for the Future
The Second, Sixth, Seventh, and Eighth Circuits “natural reading” of the EEOC’s interpretative guidance rejects the EEOC’s stance that obesity should be “regarded as” a disability. The Richardson opinion makes clear that a court can reject a federal agency’s interpretation when they feel that deference to the agency is inconsistent with the regulation. However, employers should proceed cautiously when taking adverse action against an employee due to obesity and should ensure compliance with the law in their particular jurisdiction. The scope of obesity as a disability is divided amongst circuits and remains a question of fact in others, and the ADA may still protect an employee if there is evidence that an underlying physiological condition causes the employees obesity.
* Jasmine Riddick, Summer Law Clerk, assisted in the research and drafting of this post. Riddick is a rising 2L student at Emory University in Atlanta, Georgia.
Effective 2014, the Missouri legislature amended certain provisions of the Workers Compensation Act, Mo.Rev.Stat. 287.010 et seq. A key goal was to make the Workers Compensation Act the exclusive remedy for employees who suffered occupational diseases like asbestos-caused mesothelioma. In Hegger v. Valley Farm Dairy Co. decision, 2019 Mo. App. LEXIS 816, 2019 WL 2181663 (Mo. App. May 21, 2019), the Missouri Court of Appeals addressed the application of the Act’s new occupational disease provisions in the situation where the employer went defunct before the enactment of the amended statute.
The facts of Hegger are straightforward: Vincent Hegger worked for Valley Farm Dairy Company maintaining industrial equipment from 1968 to 1984. Over this time, Mr. Hegger had continued exposure to asbestos fibers in the equipment he maintained. Amerisure Insurance Company provided Valley Farm workers compensation coverage from 1983 to 1984 while Travelers Indemnity Company provided coverage from 1984 to 1985. Valley Farm later went out of business, in 1998.
In 2014 Hegger was diagnosed with mesothelioma caused by asbestos exposure. In March 2014, Mr. Hegger filed for workers compensation benefits. Specifically at issue was whether Hegger was entitled to the enhanced workers compensation benefits for mesothelioma provided for in the recently enacted Mo.Rev.Stat. 287.200.4, even though his employer Valley Farm went defunct long before the statutory amendment. The administrative law judge and subsequently the Labor and Industrial Relations Commission ruled that because Valley Farm went defunct well before the 287.200.4 came into effect, Hegger was not entitled to enhanced workers compensation benefits. The Court of Appeals reversed.
Section 287.200.4 of the Workers Compensation Act provides in relevant part:
For all claims filed on or after January 1, 2014, for occupational diseases due to toxic exposure which result in a permanent total disability, or death, benefits in this chapter shall be provided as follows:
(2) For occupational disease due to toxic exposure, but not including mesothelioma, an amount equal to two hundred percent of the state's average weekly wage as of the date of diagnosis for one hundred weeks paid by the employer; and
(3) In cases where occupational diseases due to toxic exposure are diagnosed to be mesothelioma:
(a) For employers that have elected to accept mesothelioma liability under this subsection, an additional amount of three hundred percent of the state’s average weekly wage for two hundred twelve weeks shall be paid by the employer or group of employers such employer is a member of. Employers that elect to accept mesothelioma liability under this subsection may do so by either insuring their liability, by qualifying as a self-insurer, or by becoming a member of a group insurance pool. A group of employers may enter into an agreement to pool their liabilities under this subsection. If such group is joined, individual members shall not be required to qualify as individual self-insurers. Such group shall comply with section 287.223. In order for an employer to make such an election, the employer shall provide the department with notice of such an election in a manner established by the department. The provisions of this paragraph shall expire on December 31, 2038; or
(b) For employers who reject mesothelioma under this subsection, then the exclusive remedy provisions under section 287.120 shall not apply to such liability. The provisions of this paragraph shall expire on December 31, 2038 . . .
(Emphasis added.). The trade-off for employers is clear. Elect to provide enhanced workers compensation benefits and enjoy the exclusivity protections of the Act; versus potentially being exposed to civil lawsuits for your employees’ asbestos-related occupational diseases.
Defunct employers can elect to provide enhanced workers compensation benefits
In holding that Valley Farm’s insurers were liable for enhanced workers compensation benefits, the Court of Appeals focused on the “elect to accept” language in the statute, and the three aforementioned ways an employer can accept the enhanced mesothelioma benefits (and thus become immune from a civil action for personal injuries based thereon): (1) "insuring their liability," (2) qualifyingas a self-insurer, or (3) becoming a member of a group insurance pool. The Labor and Industrial Relations Commission held that this election required an affirmative act, possibly entailing the purchase of new insurance policies providing for the enhanced benefits.
The Court of Appeals disagreed, holding that the plain language of 287.200.4 does not require the employer to purchase a new policy and does not state when a policy covering these enhanced benefits must be purchased. Rather, the court observed that because the workers compensation law required an employer to insure their entire liability under the workers compensation law, Valley Farms’ provision of workers compensation coverage back in 1984 retroactively satisfied the section 287.200.4 election requirements. This is so even if the subject insurance policies did not provide for the enhanced benefits now contemplated by the statute. The court reasoned that Missouri precedent had typically held that the insurer providing coverage at the time of last exposure (here 1984) was liable for workers compensation benefits, while the law in effect at the time of diagnosis (here 2014) governed the amount of the claim. Given this precedent, the Court of Appeals had no problem holding Valley Farms’ insurers liable for enhanced benefits that were not contemplated in 1984.
The Court of Appeals criticized the Labor and Industrial Relations Commission ruling, observing that the Commission’s requirement of an affirmative election would yield what it believed to be inconsistent results with regard to defunct employers or employers that had moved out of state. As noted, defunct employers would always yield a rejection of enhanced workers compensation benefits for mesothelioma because they were not capable of making an affirmative election.
The court compared this result to the statute’s treatment of occupational diseases other than mesothelioma under section 287.200.4(2). That section does not provide a similar election requirement for these other diseases. The court reasoned that in the cases of defunct employers, mesothelioma sufferers may not be entitled to workers compensation benefits while the sufferers of other diseases would be. The court found this potential disparate result untenable given the severity of mesothelioma compared to “other serious but less virulent occupational diseases due to toxic exposure.”
At the heart of the Court of Appeals’ majority opinion is the desire to protect sick employees who may be without civil recourse against a judgment-proof defunct employer. But this appears to be a results-oriented decision that effectively removes any requirement that the employer make an affirmative election, despite express statutory language requiring the same.
In arguing that the Commission’s ruling was correct, the dissent observed that the majority was playing “temporal” games interpreting the phrase “by insuring” to include any past acts. However, the phrase “elect to accept” connotes a present action. By interpreting the statute to allow past acts to fulfill the present election requirement, the majority rewrote the statute.
The dissent also observed that the majority’s reading of the statute now allows one to make an election by simply relying on a past act or abstaining from a decision, both incompatible with the ordinary meaning of the phrase “elect to accept.” The majority’s interpretation also presents a problem when viewed in the context of an employer that is still in business but that has failed to add enhanced benefits coverage to their workers compensation policy. Per the majority analysis, that employer has still elected to adopt the enhanced benefits despite doing nothing. Finally, the dissent noted that the majority’s reading would render 287.400.4(3)(b) meaningless, as an employer who previously had workers compensation insurance could not then reject the enhanced benefits available under (3)(a).
While sympathizing with the majority’s concern that numerous employees could be without recourse against defunct employers who never made an election, the dissent noted that this was an issue that doubtlessly was analyzed and taken into account by the legislature.
ConclusionPerhaps encouraged by the strong and well-reasoned Court of Appeals dissent, defendants are seeking transfer of the case to the Missouri Supreme Court. The majority decision appears to take substantial liberties with the statutory language used by the legislature. Under the majority's reasoning, the election contemplated by section 287.200.4 has two different meanings depending on whether the subject employer is still a going concern or defunct. Regardless of the ultimate judicial outcome, the legislature may want to circle back and address the specific circumstances raised in Hegger.
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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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