Employee arbitration provisions and agreements have been under increased scrutiny. However, in a 2015 case, Hewitt v. Honorable Kristine Kerr, the Missouri Supreme Court enforced an agreement to arbitrate against a former employee of St. Louis Rams. The case is a helpful refresher on Missouri law on arbitration agreements for employers who wish to arbitrate employment claims.
Of the many takeaways in Hewitt, below are a few noteworthy points:
1. The agreement must bind both the employee and the employer to be enforceable.
If only one party is bound to arbitrate, while the other gets to choose whether to arbitrate, you have a problem.
2. Employee’s inability to negotiate terms is not fatal to the agreement.
Hewitt argued that the agreement should not be enforced because its terms were non-negotiable. The Missouri Supreme Court explained that courts should not invalidate arbitration agreements simply because of unequal bargaining power of the parties or because the agreement is a contract of adhesion as those are hallmarks of today’s consumer contracts.
3. The agreed upon arbitrator must be a neutral third party.
The agreement provided that the Commissioner of the National Football League was to be the sole arbitrator of any dispute between Hewitt and the Rams and had unfettered discretion to establish arbitration rules. The Court explained that given that the Commissioner was employed by the League, i.e. the team owners, the appointment as arbitrator required him to arbitrate claims against his employers. The Court struck down the arbitrator selection in the agreement given the Commissioner was in the “position of bias” given the nature of his relationship with one of the parties.
4. Unenforceability of certain parts of the arbitration agreement does not nullify the whole agreement – some terms may be implied.
The Missouri Supreme Court explained that when certain terms are missing or struck by the Court as unconscionable, they can be implied from within the applicable portions of the Missouri Uniform Arbitration Act. In the Hewitt case, the MUAA served to provide for selection of a new arbitrator given the Court struck the agreement’s arbitrator selection.
Employers seeking more information to ensuring their arbitration agreements are in compliance with current Missouri or other State laws, or whether using arbitration agreements is a best practice for their business should speak to qualified counsel promptly.