Lugar de Noticias Haynes and Boone

Texas Supreme Court Upholds Mandatory Arbitration
05/30/2002
Dean J. Schaner

Earlier today, the Texas Supreme Court gave a green light to company required arbitration programs.  In Re Halliburton Company And Brown & Root Energy Services, No. 00-1206 (Tex. May 30th, 2002). The underlying case arose when both the district court and court of appeals refused to order a case brought under the Texas Commission on Human Rights Act to arbitration.  In reversing the lower courts, the Supreme Court dispelled the notion that requiring an arbitration agreement as a condition of employment was improper and would not be enforced.

The Court held that an employee who continues employment after being notified that the terms of employment are changed to include a requirement that all disputes are to be resolved by binding arbitration has agreed to arbitration as a matter of law.

The Court rejected an argument that because a statutory claim was involved that the agreement must be "knowing", declining to follow both court decisions which had adopted that test and the Equal Employment Opportunity Commission's opposition to compulsory arbitration.

Finally, the Court concluded that it was the province of a court to determine both  procedural and substantive unconscionability of an arbitration clause. (Procedural unconscionability refers to the circumstances surrounding the adoption of the provision and substantive unconscionability refers to the fairness of the provision itself.)  Mere disparity of bargaining power between an employer and employee is not sufficient to find a clause procedurally unconscionable. Because an at will employee may be terminated at any time, it is not impermissible to premise continued employment on accepting new terms of employment.  To determine whether the plan was substantively unconscionable, the Court reviewed the terms of the plan itself and found no showing that it was unfair to the employee. The reviewed program not only provided all the remedies that the employee would be entitled to in court, but provided for recovery of attorneys fees if the employee received a favorable award, even if such an award would not have been available by statute.

With this decision of the State’s highest court, there remain almost no legal barriers to a carefully crafted program requiring all employment disputes with an employee to be resolved through the arbitration rather than in a traditional jury trial.  While mandatory arbitration programs may not be the best option for all employers, it does make sense for employers to review the advantages and disadvantages of these programs and make a conscious decision whether it would be beneficial for them.