Texas District Court Deems Arbitration Agreement Enforceable

The US District Court for the Southern District of Texas recently held that a dispute between a group of employers and a former employee should be submitted to arbitration, finding that the arbitration agreement was valid and not “illusory” as the plaintiff had argued. Alleging that, during his brief employment as a refinery worker, he and other employees were not properly compensated for overtime work, the plaintiff brought causes of action for violations of the Fair Labor Standards Act, as well as equitable claims for quantum meruit and unjust enrichment. Defendants moved to dismiss the action and to compel arbitration on the grounds that the dispute was covered by a binding arbitration agreement and that the plaintiff should be compelled to arbitrate individually rather than as part of a class action. The plaintiff contended that the arbitration agreement was “illusory” because it allowed the defendant employer to unilaterally amend or terminate the agreement retroactively. In rejecting this argument, the court cited the Texas Supreme Court’s decision, In re Haliburton Co., which involved a similar challenge by an employee to an arbitration agreement containing almost identical language. The court concluded that like the arbitration agreement in Haliburton, the agreement before it contained provisions that precluded the defendant employer from retroactively modifying or eliminating its arbitration policy, thus making it valid rather than “illusory.” The court further concluded that the question of whether the plaintiff could arbitrate on a collective or class action basis was for the arbitrator to decide.

Gonzales et al. v. Brand Energy & Infrastructure Services, Inc., No. H-12-1718 (S.D. Tex. March 20, 2013).