Employee may be forced to arbitrate employment claims under FAA

In 2007, the Oregon Legislature amended Oregon's arbitration statute to impose an additional requirement on employers that sought to require employees to arbitrate employment-related disputes: the employer must either provide notice of the requirement at least two weeks prior to the time employee starts work, or have the employee sign the agreement in connection with a bona fide advancement. See ORS 32.620(5).  The amendment was of questionable validity because it imposed additional requirements on arbitration agreements that did not apply to contracts generally, something arguably prohibited by the Federal Arbitration Act (FAA), 9 USC § 2.  Judge Brown recently put this issue to rest in Bettencourt v. Brookdale Senior Living Communities, Inc.

Deanna Bettencourt challenged the enforceability of an arbitration agreement based on the fact that she signed it after she started work and not in connection with any advancement.  She argued that under ORS 32.620(5), the agreement was void. The defense argued that the FAA preempts Oregon law and, therefore, prohibits Oregon from imposing any additional requirements on arbitration agreements that do not apply to contracts generally.  Judge Brown agreed, finding that the FAA places arbitration agreements on the same footing as any other contract. Consequently, ORS 32.620(5), which "only renders unenforceable arbitration agreements that would otherwise be enforceable under the FAA" is invalid.  While Judge Brown's ruling eliminated one obstacle to arbitration, she ordered the parties to go to trial on whether the parties agreed to arbitrate.

Judge Brown's ruling is good news for Oregon employers who favor arbitration over going to court.  However, employers should keep in mind that there are many issues to consider before committing to arbitration - one being that the agreement to arbitrate will likely be litigated as a preliminary matter, before the parties ever get to the underlying claims.  Therefore, before running headlong into arbitration, it is a good idea to go over the pros and cons with counsel.

Comments

[Joe Kiefer]

Pre-dispute binding arbitration provisions in employee and consumer adhesion contracts are unfair. Typically a lay consumer or employee does not even understand what an arbitration is. Most employees and consumers are unaware that the arbitration forum generally favors businesses, because it usually shields the business from "open" court and public opinion, and because arbitration awards are generally smaller than a jury verdict made by one's own peers. I find it interesting that most car dealers insist on using predispute binding arbitration provisions in their adhesion consumer contracts, but lobbied Congress to make law prohibiting the use of arbitration agreements in contracts between auto manufacturers and auto dealers. The auto dealers' stated reason (among others) was that arbitration denied these dealers protections afforded them under state law.

So, even if Judge Brown got it right on the preemption issue, the arbitration laws need to change in order to eliminate inherently unfair "private" courts--compared to state or federal courts--supported by businesses.

That being said, I feel that post-dispute agreements to enter into binding arbitration is still a good form of alternative dispute resolution. After a dispute arises, and after a consumer or employee has had an opportunity to consult counsel regarding the dispute, any agreement to enter into binding arbitration is done knowingly and intelligently, and the waiver of a right to a jury trial is done with eyes wide open.

My 2 cents on this opinion.