Tuesday, January 3, 2012

Unilateral Arbitration Unenforceable in CA

A segment in "Hot Coffee; Is Justice Being Served?" by Susan Salodoff deals with binding arbitration agreements in employment and other contracts, and focuses on Jamie Liegh Jones who alleges she was brutally drugged and gang raped by Haliburton subsidiary KBR employees while working in Iraq, but whose employment agreement with an arbitration clause kept her from a jury for nearly five years.

The Fifth Circuit Appeals Court ultimately found that the binding arbitration clause did not apply to Jones' sexual-assault charges; her contract covered work-related disputes but "stopped at her bedroom door."

Jones finally got to a jury, and lost her case in July 2011.

I don't know if Jones got workers' compensation for her alleged injuries or if those were subject to arbitration also.

The Jones case also sparked 2009 legislation introduced by Senator Al Franken to prohibit government contracts with Defense Department vendors using arbitration clauses in their employment contracts for certain complaints, including sexual assault.

The point of highlighting the Jones case in Hot Coffee was to bring attention to the prevalence of arbitration agreements in every day contractual situations and show how binding arbitration can drastically alter the rights of the parties, particularly where there are uneven bargaining positions such as in an employment situation, cell phone contract, web site service, credit cards, etc.

So it was with some interest when I read in this morning's WorkCompCentral news that an employer's arbitration agreement was unenforceable because it was procedurally and substantively unconscionable.

California's 3rd District Court of Appeal found in the published opinion of Wisdom v. AccentCare, that an arbitration provision in an employment contract was procedurally unconscionable because "its language implied there was no opportunity to negotiate, because the rules of any arbitration were not spelled out in the agreement or attached thereto, and because plaintiffs did not understand that they were waiving their right to a trial, nor was that fact explained to them."

The arbitration agreement was also found to be substantively unconscionable because it lacked mutuality - it violated one of the basic tenets of contact law which is to express some bargained for consideration. In other words, the terms of the arbitration agreement unfairly favored AccentCare.

The court explained that there was no language that bound AccentCare to arbitrate its claims against the plaintiff employees. Instead, the agreement only required the plaintiff employees to arbitrate their claims. Therefore, there was no mutuality of performance, the court concluded.

The plaintiffs in the AccentCare case had filed a complaint for damages, injunctive and declaratory relief, contending that they were not paid for all of the overtime they spent handling off-hour calls. AccentCare had sought to force the matter into binding arbitration.

While the AccentCare case is not about workers' compensation per se, the trend of arbitration clauses in employment contracts is, I think, of concern. At least in California, and I believe in most states, the right to adjudication of one's work injury claims can not be altered and passed down to arbitration unless it is part of a wider collective bargaining agreement where the law presupposes greater bargaining positions on behalf of the employee via union representation.

Even then, arbitration is not binding and can be reviewed by the administrative law courts, and ultimately the civil courts. This ensures a more level playing field and serves as an important protection of our 7th Amendment rights to have disputes resolved by a jury of our peers.

Arbitration can serve as a useful dispute resolution tool where there is a true bargained for exchange and the parties know what they're getting into. The rules of the American Arbitration Association bear this out, with their arbitrator selection process and other procedural rules intended to commit as fair a proceeding as possible while saving the parties time and money.

But like many a good thing arbitration and the waiver of civil rights can be abused.
"We have known the truth for a long time now, and we are very relieved and gratified to get these facts out to the public," Daniel Hedges, a lawyer representing KBR said in the Wall Street Journal.

The curious thing is that KBR spent five years and untold amounts of money attempting to do exactly the opposite.

Sometimes we read about unbelievable workers' compensation cases - the recent firefighter's case of injury on Catalina Island while trimming a wisteria bush comes to mind - but at least the parties have a forum for dispute resolution on a level playing field.

What Hot Coffee wants to remind you is that Constitutional rights are too easily dismissed ... until we need them, and then it might be too late.


  1. Dear Mr. De Paolo

    Ms Jones, assuming she was an employee, would have been covered by the Defense Base Act. The procedure under the DBA is the same as under the Longshore & Harbor Workers' Compensation Act. The employer would be protected from suit by the exclusive remedy provision in the Act.

  2. Thanks John - I understand that. The suit Jones sought was that KBR knowingly placed her into a dangerous situation because there was evidence of other women being raped and still they placed her in an all male dorm, then locked her in a container, and other assorted intentional tort allegations from which exclusive remedy is exempted. I don't know whether she also attempted to collect compensation under the DBA.