Fourth Circuit Held Employer's Right to Unilaterally Amend Employment Procedure (Web)

Hill v. PeopleSoft USA, Inc. (4th Cir. June 22, 2005).  The Fourth Circuit held that an employer's reservation of the right to unilaterally amend an internal employment dispute resolution procedure did not render its arbitration agreement unenforceable. The court determined that since the internal dispute resolution procedure was contained in a separate document, and not in the arbitration agreement the employee signed, the employer's ability to unilaterally revise the procedure did not render the arbitration agreement unenforceable.

Karen Hill received an offer letter from PeopleSoft for the position of a customer product consultant in August 2001. Conditioned on her employment, Hill was required to sign a separate arbitration agreement. The offer letter stated that if Hill accepted the employment, she would be subject to the Internal Dispute Solution Program.  The arbitration agreement stated that all issues arising out of the employment must be arbitrated. 

Hill filed a claim in Federal District Court alleging sexual harassment and discrimination.  In response, PeopleSoft filed a motion to compel arbitration, which was denied by the trial court. The trial court rationalized that because the employer could unilaterally amend its internal dispute resolution procedure, the employee’s consideration for signing the arbitration agreement was illusory, and therefore the agreement unenforceable. 

On appeal, the Circuit Court turned to Maryland contract law to hold that in determining the enforceability of an arbitration agreement, the court must look solely at the language of the arbitration agreement itself.  Cheek v. United Healthcare of Mid-Atlantic, Inc., 378 Md. 139, 835 A.2d 656, 661 (Md. 2003).  As such, the court found the arbitration agreement to be clearly enforceable. Accordingly, the court remanded the case for proceedings in accordance with the arbitration agreement. The court noted that the trial court was not at liberty to go beyond the language of the Arbitration Agreement to determine if the agreement contained an illusory promise. 

The case may be found at: http://pacer.ca4.uscourts.gov/opinion.pdf/042187.P.pdf