Texas Supreme Court Embraces Binding Arbitration in Employment Disputes

June 20, 2002

The Texas Supreme Court also recently provided private sector employers some good news concerning mandatory arbitration programs. The Court's latest decision makes it clear that arbitration agreements are here to stay and that the Court is tired of continued, unfounded attacks on the enforceability of such agreements, especially in the employment context.

In the late 1990's, Halliburton implemented an alternative dispute resolution program applicable to all current and future employees. The program provided for binding arbitration, specified an effective date and specifically forewarned current employees that continued employment constituted acceptance of the program--which, in turn, meant a commitment to submit all future workplace disputes to binding arbitration rather than seek relief at the courthouse.

James Myers, a long-term, at-will employee, received notice of Halliburton's new arbitration program and continued working for the company after receiving the notice. Myers was subsequently demoted and filed a charge of race and age discrimination with the Texas Commission on Human Rights, the state's fair employment practices agency. He also subsequently sued Halliburton in state court and the company filed a motion to compel arbitration. The trial and appellate courts denied Halliburton's motion and the dispute made its way to the state's highest court. The Texas Supreme Court overruled the lower courts' decisions and concluded Halliburton's arbitration program was entirely lawful.

Your company's arbitration program can also bask in the legal protections afforded by the Halliburton decision if it meets the following 10 requirements, all of which were quite significant to the Court's analysis and holding:

  1. Provide full and fair disclosure, in plain and simple English, concerning the arbitration program's effective date, purpose and scope;
  2. Ensure the program is broadly defined to encompass statutory discrimination claims under federal, state and local fair employment practices laws, as well as common law claims;
  3. Obtain individual employee acknowledgment receipts regarding the program’s announcement;
  4. Notify employees their continued at-will employment after the effective date constitutes program acceptance;
  5. If the program allows for unilateral company modifications or rescission, be sure it also affords a grace period that, for a short time, continues the existing program for all pre-existing disputes or, those of which company had actual knowledge at time of the modification/rescission;
  6. Assess the company with the bulk of the arbitration costs and fees ($50 filing fee for employees permissible);
  7. Afford employees equal input in arbitrator selection process;
  8. Allocate up to $2,500 in company funds for each employee-claimant’s legal services;
  9. Conduct arbitration in accordance with federal/state rules of civil procedure; and
  10. Empower arbitrators to award full relief, including costs and attorneys fees.

The Texas Supreme Court has made it clear that arbitration programs that comport with these fundamental due process requirements are welcome in this state and should be steadfastly enforced by all Texas courts.

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