Sometimes, a decision can detail the requirements for an enforceable employee arbitration agreement better than a legal treatise. That is certainly true in Gustave v. SBE ENT Holdings, LLC, No. 1:19-cv-23961 (S.D. Fla. Sept. 30, 2020). In Gustave, 19 former food and beverage or kitchen workers at the Delano Hotel in Miami Beach, Florida, brought claims against the defendants for violations of Title VII of the 1964 Civil Rights Act, the Florida Civil Rights Act, the Age Discrimination in Employment Act (ADEA) and the Americans with Disabilities Act (ADA), and for a hostile and abusive working environment. The defendants had purchased the hotel in 2016 and, according to the plaintiffs, sought to “rebrand” the hotel by using younger workers.
Eventually, the defendants filed a motion to compel arbitration for 15 of the 19 plaintiffs. The motion was stayed for six months while arbitration-related discovery took place – including the plaintiffs’ depositions of at least four witnesses. Much of the discovery apparently centered around such issues as unconscionability, scope, waiver and novation, even though the plaintiffs’ signing of an Acknowledgement in which they agreed to arbitrate certain claims was undisputed. Ultimately, District Judge Robert N. Scola Jr. granted the motion to compel arbitration, but only after slogging through five counterarguments raised by the plaintiffs in opposition. Those arguments illustrate some of the basics required for an enforceable arbitration agreement.
First, was there an enforceable arbitration agreement? Was it an acknowledgement, a handbook or a combination? While an Acknowledgement may create a binding contract, it was unclear which handbook the Acknowledgement referenced with the phrase “this Handbook.” Even though the Acknowledgement manifested “an intent to arbitrate,” the court next explored whether “optional language in the 2016 Handbook (stating ‘the employee may proceed to arbitration’) superseded the mandatory language in the Acknowledgement.”
But the language of the 2016 Handbook resolved that dilemma. It declared, “[n]othing in this Handbook is intended to change the at-will policy, and neither this Handbook nor its contents, constitutes a contract of any sort.” Plainly, a document claiming to be “a superseding contract must, in the first instance, be a contract.” (Emphasis added.)
Next, the court found that the defendants’ failure to engage in a claimed pre-arbitration dispute resolution procedure did not waive or repudiate the Acknowledgement because the referenced discussion of concerns with a supervisor did not rise to the level of “an enforceable condition precedent to arbitration.”
The court then quickly disposed of the issue of whether the claims made by the plaintiffs fell within the coverage of the Acknowledgement. They did. When signing the Acknowledgements, the plaintiffs agreed to “Binding and Final Arbitration of any dispute I have relating to employment ….” That was sufficient, according to the court. References to “employment” in agreements are broad enough to also cover termination claims. See Lambert v. Austin Ind., 544 F.3d 1192, 1199 (11th Cir. 2008) (holding termination claims are within the scope of an agreement to arbitrate disputes “related to employment”).
The court then analyzed perhaps the most interesting issue, whether the Acknowledgements were unconscionable on both the substantive and the procedural prongs. As a threshold matter, the court felt that the plaintiffs’ strongest argument might be that the agreement was unilateral, meaning that only employees had to submit employment-related disputes to arbitration. But the court determined it was not true because the Acknowledgement “mutually obligated [the defendants] and the employers to arbitrate.” The threshold language stated, “Morgan’s Hotel Group agrees and each …,” creating a mutual obligation to arbitrate.
Finally, the court turned to the plaintiffs’ procedural unconscionability arguments. While there was no substantive unconscionability, the court reviewed the procedural element in its reasoning. The focal point of the procedural unconscionability argument hinged on the “plaintiffs’ lack of English proficiency” and the fact that the Acknowledgements were written in English, while the plaintiffs were Spanish- and Creole-speaking individuals. But “the parties agreed that a Spanish translator was present when some of the plaintiffs were presented with the Acknowledgements.” Based on Florida law, a party to a contract is presumed to understand its contents. See Rocky Creek Ret. Properties, Inc. v. Estate of Fox ex rel. Bank Am., N.A., 19 So. 3d 1105, 1109 (Fla. 2d DCA 2009). Here, the plaintiffs failed to demonstrate “that they took any effort to satisfy their duty to learn and know the contents of the agreements that they signed.” Nor was there any evidence of misrepresentation.
The court also brushed aside the plaintiffs’ final argument that the print font of the 2009 Handbook was too small in a document that ran over 100 pages. Indeed, according to the court, the waiver was not hidden and “was arguably the most conspicuous of the provisions in the 2009 Handbook because it was highlighted in the Acknowledgements.” So, the motion to compel was granted as to the 15 plaintiffs and the action stayed as to them.
While the new hotel ownership likely gave rise to some of the uncertainty in the case, the court’s careful analysis of the multiple handbooks and the Acknowledgement is in many respects like “Arbitration Agreements 101.” Here are some of the key takeaways:
- If possible, arbitration agreements should be stand-alone documents, not part of a handbook that states it is not a contract.
- Consider having the arbitration agreements executed manually or electronically by the applicant or employee concerned.
- The arbitration agreement generally should be mutual, covering both parties, and both parties should be entitled to injunctive or equitable relief from courts in support of the arbitral proceeding.
- Consider having key terms of the arbitration agreement, such as those evidencing consent and waiving rights, printed in a bold or larger font.
- Take steps to ensure that individuals not fluent in English can understand the agreement. This may include a non-English version of the agreement, an available translator or allowing the applicant or employee to have additional time to review the agreement.
- Arbitration agreements should state whether they supersede or complement prior agreements or other company documents in the employment arena.
- Arbitration agreements should state whether they can be amended or revised, how that may be done and the impact of any changes on pending claims.
These considerations should lessen any doubts concerning the scope and content of arbitration agreements and should aid enforceability.
Courts are becoming less receptive to arguments that have been commonly used to avoid arbitration agreements.
John Lewis concentrates his practice on the resolution of complex employment, labor and regulatory disputes, including the defense and oversight of class action litigation. The majority of John's time is devoted to litigation, appellate practice and alternative dispute resolution procedures involving federal and state anti-discrimination, wage and hour and fair housing laws, the Railway Labor Act, the Civil Rights Acts, the Federal Reserve Act, the Federal Railroad Safety Act and the Employee Retirement Income Security Act, as well as wrongful discharge, trade secret, non-competition and work-related tort claims. He has participated in more than 90 cases before federal and state appellate courts, including filing amicus briefs before the U.S. Supreme Court. Highly regarded in his field, John is an elected member of the American Law Institute and a Fellow of the College of Labor & Employment Lawyers. He is listed in Chambers USA, The Best Lawyers in America©, Who's Who in America, and Who's Who in American Law, and was named one of the "Nation's Most Powerful Attorneys – Top 100" by Human Resource Executive magazine. John regularly contributes to BakerHostetler's Employment Class Action blog and is a frequent speaker and author on employment, anti-discrimination, arbitration, preemption, defamation, and class action law topics. He is also the author of the Employment Practice Self-Assessment Guide, Fifth Edition, published by Aegis Insurance Services Inc.