Employment: Texas Appeals Panel Refuses to Enforce Arbitration Policy (Web)

In In re Brookshire Bros. Ltd., No. 06-06-00059-CV, 2006 Tex. App. Lexis 6178 (Tex. App. July 18, 2006)(available at http://www.6thcoa.courts.state.tx.us/opinions/HTMLopinion.asp?OpinionID=8344), the Texas Sixth District Court of Appeals held that an arbitration policy between an employer and an employee did not manifest an intention to cover a pre-existing dispute when the arbitration policy itself didn't specifically include a retroactive provision, and the structure of the policy's language didn't suggest that past events were covered by the relevant provisions.

The unanimous appellate panel opinion, denying an employer’s request for mandamus relief, also held that the arbitration policy, as applied to an employee's who had requested mediation, was procedurally unconscionable. The opinion notes that the employee already had expressed an intention to pursue legal action.

Clara Mayfield was injured after she slipped and suffered an injury while working at Brookshire Brothers, Ltd.'s Carthage, Texas, grocery store in July 2004. She “did not physically work for Brookshire,” according to the opinion, after Oct. 28, 2005. But she continued collecting accrued medical and disability benefits from Brookshire.

On Aug. 29, 2005, Brookshire enacted a company policy requiring that employee disputes go to arbitration. After notifying Mayfield of the policy in January 2006, Brookshire sought to compel arbitration of her dispute pursuant to the arbitration policy.

The appeals panel agreed with Mayfield that her pre-existing dispute does not have to go to arbitration since the arbitration policy, enacted over a year after her injury, did not operate retroactively.

First, the panel observed that Mayfield’s July 2004, injury, occurred more than a year before the August 2005, date, on which Brookshire instituted the arbitration policy.

Second, Brookshire unilaterally established the arbitration policy terms without specifically including prior claims. The court noted that if any ambiguity existed as to whether the contract specifically included a retroactive provision, the ambiguous language should be construed strictly against the drafter.

Third, the court examined the arbitration clause’s structure, and concluded that the relevant portion meant to apply only to future events, as indicated by the common usage of the italicized words in the following arbitration agreement sentence:

"'The policy will cover all disputes arising out of your relationship with Brookshire."

According to the court, the phrase, "will cover," refers to future events, as does the term "arising out of," which suggests events that have not yet "'come into being.'"

Fourth, Mayfield's case is bolstered by testimony from Brookshire’s designated representative, who “originally testified” that "it was not Brookshire's policy that the arbitration provision applied to claims which occurred before August 29, 2005," the policy’s effectiveness date.

The opinion, by Justice Jack Carter, also accepts Mayfield's allegation that the arbitration policy, as applied to her circumstances, is procedurally unconscionable.

Mayfield has more at stake than other employees when deciding whether to accept the adhesive terms of her agreement with Brookshire, since she would have to give up her accrued medical and disability benefits if she were to resign in order to file suit. The court sums up the contractual consequences that face Mayfield in two words: "'nonbargaining ability."

In addition, Mayfield had scheduled a mediation and retained a lawyer before she received notice of the arbitration policy, thereby "invok[ing] the 'machinery of the justice system.'" To allow Brookshire to cancel the mediation, and to bind Mayfield to its policy after she has already taken action, effectively changing the rules in the middle of the game, would further contribute to the unreasonable nature of the arbitration policy. “Since it is the policy of our state to encourage alternative dispute resolutions,” wrote Justice Carter, “an employee should not be penalized for attempting to resolve a matter by a sanctioned alternative to litigation.”

--John Ousley, CPR Intern