Court Enforces Arbitration Clause in Employment Manual

Forcing arbitration of employment disputes is getting easier, at least under one federal judge’s reading of Massachusetts law. Ignoring an employer’s express statements that its employment manual was “not a contract of employment” and was “intended for informational purposes only,” the court found that an arbitration clause in the manual was contractually enforceable. It ordered arbitration of the former employee’s discrimination suit even though the arbitration clause was added to the manual well after he was hired.

The court relied in large part on a 1996 Massachusetts case that permits an employment manual to become an employment contract under some circumstances. Creating contract rights requires a review of the circumstances that existed when an employee began working. In most cases since 1996,  employees and not employers have sought to enforce the terms of employment manuals. It has proved extremely difficult for them to do so, since most employers include strong disclaiming language in their manuals and most judges look skeptically on manual-as-contract claims.

Amid this backdrop, the most interesting aspect of the U.S. District Court’s decision in Daniels v. Raymours Furniture Company, Inc. ,issued on March 31, 2014, is the conclusion that a contract existed for arbitration purposes despite the sort of express disclaimer language often held up by employers to defeat employees’ claims to contractual manual rights. The Daniels decision may thus represent another example of the general policy in favor of arbitration over other forms of dispute resolution. In 2009, e.g., the Massachusetts Supreme Judicial Court held that discrimination suits under Mass. Gen. L. ch. 151B can be forcibly arbitrated. In 2013, it concluded that an employee can waive his/her right to pursue class action litigation in an arbitration clause. Both decisions and the one by the U.S. District Court are helpful to employers, who often prefer the relative simplicity and finality of arbitration over trials at the Massachusetts Commission Against Discrimination (MCAD) or in courtrooms.