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Michael P. Maslanka, Editor
Ford & Harrison LLP
Vol. 19, No. 7
July 2008
ARBITRATION
Trucking company's ADR program gets sideswiped
On June 3, a federal district judge in El Paso punctured the wheels of Swift Transportation Company's arbitration program. Why she reached that decision is instructive. And frankly, many of you may have the same infirmities in your program that Swift
had. Read on.
Words matter ― a lot
Albert Zamora was the terminal manager for Swift in El Paso. In 2002, he was required to sign a document acknowledging that he had received a copy of the company's alternative dispute resolution (ADR) policy, which required him to arbitrate any
employment disputes. Five years later, he was terminated and sued Swift for national origin discrimination. Here's the question: Does the matter proceed to a jury, or must it go to arbitration?
Swift had two separate documents: an employee handbook and the ADR policy. But even though they were separate, the handbook made reference to the arbitration policy. So the court decided they would be considered one document. (Only in the law and in
magic!)
That's where the trouble started. The following two provisions come from the handbook:
I understand that the foregoing agreement concerning my employment at-will status and the [ADR] policy and the company's right to determine and modify the terms and conditions of employment is the sole and entire agreement between me and
Swift concerning the duration of my employment, the circumstances under which my employment may be terminated, the circumstances under which major employment disputes may be resolved and the circumstances under which the terms and conditions of my
employment may change.
* * * * *
Except for the policy of at-will employment, terms and conditions of employment with the company may be modified at the sole discretion of the company, with or without cause or notice at any time. Well, the court figured that 2 + 2 = 4.
Those two sections taken together meant that the company retained the unilateral right to dump the arbitration program for a good reason, a bad reason, or no reason at all. And under Texas law, that's no bueno. Both the federal court of appeals
covering Texas and the Texas Supreme Court have said that if an employer retains the right to "unilaterally abolish or modify" its arbitration program, the agreement to arbitrate is illusory (in other words, it doesn't exist under the law), and it
isn't binding on the employee.
And for good measure
Not only that, but the Federal Arbitration Act (FAA) doesn't apply to transportation workers. Was Zamora a transportation worker? Well, he wasn't to the extent that he didn't get behind the wheel of a truck and drive, but he was to the extent that he
managed the terminal.
The court said that because Zamora was responsible for terminal operations, which involved the transportation of goods, he was a transportation worker. As a result, the FAA prohibited Swift from binding him to an arbitration agreement. Zamora v.
Swift Transportation Corp. (Case No. EP-07-CA-00400-KC, June 3, 2008).
Let the big rig roll!
Do me a favor, will you? Go look at your arbitration agreement. If your policy contains the infirmity we saw in this case, change it immediately through an amendment. Otherwise, you may be sitting there thinking that you have a valid arbitration
agreement when you really have one that's susceptible to attack.
In addition, the November elections may bring us a Democratic President and Congress. If that happens, there's a good likelihood that arbitration agreements in the employment setting may be outlawed.
So does this case mean you can never modify or even get rid of your arbitration policy? No. (Hey, even marriage isn't that bad!) Arbitration isn't like the "Hotel California," where you can check in but never leave. As a result, you should think
about including a statement in your ADR policy allowing you to alter the agreement on only one day of the year and agreeing to provide employees with 30 days' notice before making any change. State that any claims made during the 30-day period will
be honored. Those escape hatches give you the protection you need when you want to bail out.
You can find sample language for creating your ADR policy in the subscribers' area of www.HRhero.com, the website for Texas Employment Law Letter. Just log in, scroll down to HR Tools, and click on
"Sample Policies & Procedures." If you need help, call customer service at (800) 274-6774.
Copyright 2008 M. Lee Smith Publishers LLC
TEXAS EMPLOYMENT LAW LETTER does not attempt to offer solutions to individual problems but rather to provide information about current developments in Texas employment law. Questions about individual problems should be addressed to the employment law
attorney of your choice. The State Bar of Texas does designate attorneys as board certified in labor law.
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