28 JANUARY / FEBRUARY 2020 HUMAN RESOURCES Debra A. Mastrian Partner SmithAmundsen LLC dmastrian@salawus.com SmithAmundsen LLC is a Diamond Associate Member of the Indiana Bankers Association. There is a strong federal policy favoring arbitration of disputes, as expressed in the Federal Arbitration Act, which mandates that valid arbitration agreements – including employment-related agreements – must be enforced. An arbitration agreement is a contract through which the parties agree in advance to resolve any disputes that may arise through arbitration, rather than in court or through an administrative proceeding. The FAA requires that arbitration agreements be in writing, although a signature is not necessary. Proponents of arbitration argue that it is a faster, more efficient, less expensive way to resolve disputes than through administrative agencies or the courts. In yet another example of the strong federal policy, the 7th Circuit Court of Appeals recently affirmed a district court’s order granting an employer’s motion to compel arbitration of an employee’s discrimination and retaliation claims pursuant to an employee arbitration agreement. In Gupta v. Morgan Stanley Smith Barney, LLC, et al., No. 18-3584 (7th Cir. 8/19/19), a former employee filed a complaint alleging that he had been unlawfully terminated and retaliated against when the employer learned he had been called up for active military duty. The employer had an employee dispute resolution program set forth in a policy. The policy was amended to require all employment-related disputes, including discrimination claims, be arbitrated unless the employee opted out. The former employee had not opted out of the program, thus the employer moved to compel arbitration. The former employee argued that he was not aware of the amended policy and had not agreed to arbitration. The question facing the district court was whether the parties had a valid agreement to arbitrate. In determining the answer, the district court applied the state law (Illinois) principles of contract formation. Under Illinois contract law, an agreement requires a Mandatory Employment Arbitration Agreements manifestation of mutual assent. Mutual assent may be demonstrated through a party’s actions or inactions (silence), even if the agreement is not signed. The amended arbitration program was set forth in a written policy and circulated to all employees via email. The email announced the changes to the program and gave employees 30 days to opt out of the program. An opt-out form was attached. The changes were also announced on the company’s intranet. Employees were advised, both in the email and on the intranet, that silence/failure to return the opt-out form would be construed as acceptance of mandatory arbitration. The district court found that the former employee’s receipt of the email, along with continued employment and silence/failure to opt out, could be reasonably construed as mutual assent to arbitrate. The court also found that the discrimination and retaliation claims were within the scope of the arbitration program, because the policy expressly stated that those types of claims were subject to arbitration. The 7th Circuit affirmed the district court’s decision. Just because employers, in most states, can have mandatory arbitration agreements does not mean this option is right for each business. (Some states, such as California, have adopted laws prohibiting mandatory arbitration of certain employment claims. Illinois’ Workplace Transparency Act, effective Jan. 1, 2020, prohibits mandatory arbitration of certain employment claims if arbitration is a compulsory, unilateral condition of employment or continued employment.) There are pros and cons of submitting employment disputes to binding arbitration. Employers that are considering implementing mandatory arbitration of employee disputes should seek the advice of legal counsel. Arbitration agreements, like all contracts, can be challenged on other grounds. Care must be taken in drafting and implementing the agreement to guard against allegations that the arbitration agreement is
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