In a win for employers in the State of West Virginia, the Supreme Court of Appeals of West Virginia overturned a lower court’s decision that an employment arbitration agreement was unenforceable in Hamden Coal, LLC v. Varney. The lower court agreed with the employee on every relevant issue, finding that arbitration claims are viewed differently in an employment context, that the agreement was a contract of adhesion, that the agreement lacked consideration, that the agreement was unconscionable, and that the employee’s claims fell outside the agreement. The Supreme Court, however, overturned each finding and took the additional step of directing the court to enter an order dismissing the civil action and compelling arbitration.
In this case, as a condition of employment, the employee was required to sign a short agreement to arbitrate any employment-related disputes. While the contract contained bolded language advising the employee to seek the advice of counsel if the employee did not understand the agreement, the employee testified that he felt compelled to immediately sign the agreement to secure his job. Accordingly, he asserted he was deprived of the opportunity to consult counsel or fully comprehend the agreement. He further argued that the agreement lacked consideration and was unconscionable.
The Supreme Court, however, confirmed that a mutual obligation to arbitrate is sufficient consideration to form a contract—employers need not provide the employee with any additional benefit other than the promise that it, too, would be bound by the arbitration agreement. The Court further observed that, while there was no evidence that the employee did not have the opportunity to seek the advice of counsel, the Court also stated that contracts “of adhesion”—non-negotiable “take it or leave it”—type contracts are not necessarily unenforceable.
Notably, the Court also held that the agreement to shorten the statute of limitations period was enforceable without any additional consideration. The Court did spend some time analyzing this provision and observing that a one year timeframe was reasonable, and found, in this case, it could be upheld.
An enforceable agreement to arbitrate could spare the employer court proceedings, saving it a great deal of time and resources. If carefully crafted, an arbitration agreement may allow an employer to limit liability by shortening the statute of limitations period for certain claims. The best practice in crafting an agreement to arbitrate is to ensure that you cover your bases, but a long agreement filled with legalese could be vulnerable to the assertion that certain terms are unconscionable because an unrepresented employee could not have understood them. Further, it is advisable to provide the employee with the opportunity to meaningfully review the agreement should the employee be so inclined. When the employee is in a situation where he or she must immediately sign or else be precluded from a job opportunity, the employer again makes itself vulnerable to claims that the process of signing the agreement was unfair. For assistance in drafting such an agreement, consult with a competent employment attorney.