Court Compels Employment Dispute to Arbitration, Rejecting Defenses That Arbitration Clause Did Not Survive Termination and That Clause Was Unconscionable

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The dispute surrounded the employee’s termination due to an inability to be physically present at the workplace. The employee filed suit in Rhode Island state court, alleging that the employer failed to provide reasonable accommodations for her known disability. The employer removed the case to federal court and then filed a motion to compel arbitration.

The employee contended that the employment agreement and its arbitration provision ended with the employment relationship, but the court found that the arbitration clause survived the underlying contract. The court found that the language of the agreement “along with common sense” indicated that employment-related disputes, including termination, were governed by the arbitration provision. The court further ruled that whether the employment agreement was still in effect was a matter of contract interpretation that was for the arbitrator to decide.

The court also rejected the employee’s argument that the arbitration provision was unconscionable under governing state law (Utah). Regarding substantive unconscionability, the court found that the contract was not “so one-sided as to oppress or unfairly surprise an innocent party” and that there was no “overall imbalance in the obligations and rights imposed by the bargain.” The court disagreed with the employee that the arbitration provision lacked mutuality or that the required venue of Utah, the employer’s home state, was unfair. Regarding mutuality, the court held that it required only that both parties would be bound to the terms of any dispute that would be required to be submitted to the arbitrator (not that the contract must be equally balanced or that every dispute needed to be arbitrated). And regarding the venue, the court found that a Utah-based arbitration did not increase the likelihood of partiality (noting that the agreement required an arbitrator from the AAA) or create undue expense and inconvenience (the employer agreed to conduct arbitration remotely).

Regarding procedural unconscionability, the court was not persuaded by the employee’s argument that she did not have a reasonable opportunity to understand the terms of the employment agreement. The court found that the employee’s allegations went to the unconscionability of the contract as a whole, rather than the arbitration provision, which was an issue for the arbitrator, not the court.

The court compelled arbitration and elected to dismiss the complaint rather than enter a stay of the proceedings since all of the employee’s claims were subject to arbitration.

Trainor v. Primary Residential Mortgage, Inc., No. 1:20-cv-00426 (D.R.I. June 16, 2021).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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