Thinking about changing an employee policy in Texas? Kubala v. Supreme Production Services, Inc. says you can do it (almost) whenever you want. Want to make employees arbitrate their disputes? You can do that too.

Kubala’s employer Supreme announced a new policy requiring employees to arbitrate employment disputes, including Fair Labor Standards Act claims.  Continued employment was conditioned on acceptance of the agreement, which delegated to the arbitrator the power to make gateway determinations as to the arbitrability of any given claim.  Kubala did not sign that agreement after the meeting but continued his employment and accepted payment for his work.

The new policy was announced two days after Kubala had filed a FLSA collective action against Supreme but, as far as the court knew, before Supreme received notice of the suit.

The agreement to arbitrate

The first question was whether there was an agreement to arbitrate any set of claims, such as pre-existing disputes. Kubala’s obligation to arbitrate claims was imposed while he was already employed on an at-will basis.  Thus, the question:  Was there was a valid modification of the terms of his employment?

Arbitration agreements between employers and their employees are broadly enforceable in Texas. To demonstrate a modification of the terms of at-will employment, the proponent must demonstrate that the other party received notice of the change and accepted the change.

The court deemed that acceptance need not be more complicated than continuing to show up for work and accepting wages in return for work. Supreme satisfied this requirement by providing notice at a meeting where the policy was explained. Kubala knew the policy was a condition of continued employment.  He continued to work.  It doesn’t matter that he didn’t sign the agreement.

The delegation clause 

Was there was a valid delegation clause? Yes. The court was not opining on whether the agreement required that the merits of Kubala’s claim be arbitrated.  The only issue was who answers that question. The court concluded that it was plainly the right and responsibility of the arbitrator to determine his or her own jurisdiction.

Doubts

Judge Higginbotham’s cautionary concurring opinion addressed an employer’s ability to impose arbitration after the employee had filed suit. The result could be that the employer could coerce the plaintiff-employee into relinquishing his FLSA-given right to sue. Judge Higginbotham was concerned about “a regime of contracting out justice”.  Supreme’s saving grace was that it was unaware of Kubala’s suit until after the arbitration agreement became effective.

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Great New Orleans musician Pete Fountain RIP.