By: Tiffanie Benfer, Esq.
Many employers include provisions in employment contracts providing that all disputes will be submitted to binding arbitration, and shall not be litigated in court. The Eastern District of Pennsylvania recently made clear that these agreements are enforceable only if they are specific and expressly agreed to by the employee.
In Stankiewicz v. Cisco Systems, the court held that there was no enforceable arbitration agreement when it was not part of the initial employment package, but was appended by the employer to an Incentive Compensation Plan. The employer took the position that participation in the plan constituted “acceptance:” of the mandatory arbitration provision. When the plan was presented to the employee, the employee objected. His employer responded that the incentive plan was on a “take it or leave it” basis, and that if the employee did not accept he would receive only his base salary or be terminated. With no alternative to obtain his incentive bonus, the employee accepted the plan.
The court held that this was not a “voluntary” acceptance of the agreement to arbitrate, stating that the employer’s argument to the contrary was “nonsense.” The court therefore denied the defendant’s motion to compel arbitration.
This decision will be used by attorneys for employees to fight arbitration compelled by “fine print” arbitration agreements. An employer who wishes to minimize litigation expenses by requiring arbitration needs to ensure that the employee signs an agreement at the outset of employment. If the agreement to arbitrate is offered later, the employee should be offered some compensation for the changed arrangement, and the opportunity to freely negotiate. Otherwise, the provision may be unenforceable.