Arbitration Agreement- Providing More Coverage Than You Might Think

David Keene, II
February 26, 2008 — 1,868 views  
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When I help employers prepare an employee handbook, they typically question the efficacy of an arbitration agreement. Erroneously, they believe that an arbitration provision is unenforceable, or will be held unconscionable by a court. When properly drafted, however, a mandatory arbitration provision is enforceable, and can cover virtually any employment related misconduct. This fact was underscored by a decision out of Texas late last month—Barker v. Halliburton Co., S.D. Tex., No. H-07-2677. In Barker, the district court upheld a mandatory arbitration clause, requiring an employee who alleged sexual harassment and retaliation during her employment in Iraq to submit her claims to arbitration. The court held that Tracy Barker signed an agreement to arbitrate employment-related claims against Halliburton Co. and its affiliates, that she failed to show the agreement was void or unconscionable, and that therefore federal court was unavailable to her. Barker argued that she should not be required to arbitrate serious claims of discrimination, retaliation, and sexual assault that she attributed to Halliburton's tolerating a "sexually lawless environment" in Iraq, but the court said the claims were suitable for arbitration. The Facts: Employment and Alleged Assault in Iraq Barker started working in Baghdad, Iraq in September 2004. She signed an employment agreement with her employer, an affiliate of Halliburton, requiring that any claims she might have against her employer or any parent or affiliate were to be submitted to binding arbitration. The arbitration agreement specifically applied to all claims "related to" Barker's employment, as well as "any and all personal injury claim[s] arising in the workplace." Barker alleged that in Baghdad she was compelled to share housing with men and was subjected to sexually explicit comments and threats of abuse. Barker reported these allegations to her employer, who ignored her complaints and later retaliated against her. In March 2005, Barker was transferred to Basrah, Iraq, where she alleges that she was still subjected to daily abuse and harassment by her direct supervisor. Barker said there was no human resource representative at Basrah, so she (fruitlessly) directed complaints to company officials in the United States. Finally, in June 2005, Barker alleges that she was assaulted by a State Department employee. Barker claimed that after she reported the incident, her supervisor told her that he would protect her in exchange for sexual favors. Barker said that she refused, and that the supervisor later sexually assaulted her. Upon returning to the United States, Barker filed a sexual harassment and discrimination charge with the Equal Employment Opportunity Commission. She later filed a demand for arbitration pursuant to the arbitration agreement, and simultaneously filed a lawsuit in federal court in Texas. In her lawsuit, Barker alleged that Halliburton engaged in sexual discrimination by ignoring her complaints and failing to protect her, and subjecting her to retaliation; Halliburton filed a motion to compel arbitration and to dismiss the case. The Holding: The Arbitration Provision is Not Unconscionable The court held that the arbitration provision was enforceable, and granted Halliburton’s motion to dismiss and to compel arbitration of Barker’s claims. In determining whether an arbitration agreement is enforceable, courts examine whether the parties agreed to arbitrate a particular dispute and whether there were any "legal constraints" that precluded arbitration. Barker did not deny signing the arbitration agreement. She claimed, however, that the company "fraudulently induced" her to accept the dispute resolution program, as Halliburton did not tell her that she would be exposed to abusive conditions in Iraq. Her contract stated that sexual harassment and discrimination would not be tolerated, but alleges that company representatives either knew that those statements were false or at least acted in reckless disregard of the promises. The court stated that Barker's arguments were addressed to her employment agreement in general, not just to the arbitration provision, and "the question of whether the contract and the arbitration clause as part of the greater whole were fraudulently induced must be presented to the arbitrator, not this court." Next, Barker alleged that her employment agreement was void because it was unconscionable. Barker argued that enforcement of the Halliburton dispute resolution procedure would be unconscionable because she would be deprived of the chance to present her claims in a public proceeding that might provide a warning to other women about the dangers she encountered. But the court wrote that "whether the contract is oppressive to third parties is not germane to the question of whether the contract is oppressive for Barker." The court, however, held that arbitration agreements are not “inherently unconscionable, and that Barker failed to show that the agreement was unconscionable. Conclusion: Barker Must Pursue Arbitration In conclusion, the court rejected Barker's argument that the arbitration agreement did not cover her claims because at least some of them were not directly related to her employment or her employment agreement. The court ruled that the claims did not merely touch upon her employment, but were totally derived from it. Noting that Barker's Title VII claims "are by definition based on her employment," the court said that all of the former employee's claims were within the scope of the arbitration agreement. Stating that it was required to follow judicial precedent concerning the arbitration of employment-related claims, the court held that "precedent is quite clear: Barker's claims are included within the ambit of claims proper for arbitration." On a related matter, the court stayed action on a claim filed by Galen Barker, Tracy's husband, who claimed damages for loss of consortium or companionship, but never agreed to be bound by the Halliburton arbitration procedure. Applying Barker to Your Company The court’s decision in Barker underscores the advice I give to all my clients: include a mandatory arbitration clause in your employee handbook. Clearly, courts are going to enforce such agreements, even when faced with facts as outrageous as those here. Usually (though not here), mandatory arbitration clauses are a great way to keep embarrassing information out of the public spotlight and contain upsetting facts to a small group of individuals. No one wants their case to be the topic of conversation around the courthouse. And remember, before including a mandatory arbitration clause, have your labor and employment attorney review it to make sure that any particularities in your state are addressed. If you have any comment or questions about this or any other labor or employment law matter, please contact David Keene at 423.928.0181

David Keene, II

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David Keene, an associate in Baker Donelson's Tri-Cities office, concentrates his practice in the area of labor and employment law. Mr. Keene has experience in a multitude of labor and employment areas including negotiating collective bargaining agreements for both private and public sector employers; representing employers in grievance and issue arbitrations; representing employers in all matters, including elections and unfair labor practices, before the National Labor Relations Board and state labor boards; helping clients maintain union-free workforces; handling unemployment claims from initial applications for benefits through court appeals; counseling clients on a multitude of federal employment laws, including the ADA, FMLA, ADEA, and FLSA; litigating employment discrimination claims; and representing individuals against unions. Mr. Keene has been published in The Labor Lawyer, Labor Law Journal, and numerous other publications, and has taught seminars on a wide variety of labor and employment topics.