Employers who have shunned using arbitration agreements for fear that they will be overturned, will want to take a look at a recent federal court decision that upheld an arbitration agreement that had provisions that some would consider very pro-employer.
In Pomposi v. GameStop, Inc. (download here), the employer moved to dismiss a collective action for unpaid wages brought by a former employee in federal court because it claimed that the employee entered into a binding arbitration agreement expressly agreeing to resolve any claims for minimum wage and overtime through arbitration.
The so-called agreement was part of a new "C.A.R.E.S." program (Concerned Associates Reaching Equitable Solutions) that was rolled out to employees in 2007 during an annual conference held in Las Vegas. (It was later used by GameStop in its job applications as well.)
Employees were required to sign an acknowledgment at that meeting certifying that they had received the handbook that contained the new rules. The acknowledgment stated "I understand that by continuing my employment with GameStop following the effective date of the C.A.R.E.S. program, I am agreeing that all workplace disputes or claims, regardless of when those disputes or claims arose, will be resolved under the GameStop C.A.R.E.S. program rather than in court." Thus, when an employee returned from the conference to work, it was deemed to be effective.
Besides the obvious point that "What Happens in Vegas" does not really stay in Vegas, the employee claimed that he wasn’t actually agreeing to the program and that regardless, it was unconscionable and against statutory rights.
The District Court rejected those arguments. The court stated that continued employment here was sufficient consideration for the arbitration agreement. While the "language of the acknowledgment could be better phrased", the court stated that it could not be deemed to be "so deficient" as to render it invalid.
The court also found that the waiver of a "collective action" under the Fair Labor Standards Act was also valid, distinguishing this case from others were it would be "prohibitively expensive" to litigate on an individual basis. Moreover, the court stated that it is not unconscionable on a variety of grounds either.
A recent check of the docket indicated that the employee has not appealed this decision to the Second Circuit.
For employers who have or are considering an arbitration program, this decision should be reviewed and analyzed as one way to control costs. Arbitration provisions aren’t for every employer, but used appropriately, some may find it an effective way to keep their legal exposure and costs in check.