Arguments Against the Enforceability of Ohio Arbitration Clauses

Many employers try to limit potential employees claims through the use of arbitration agreements.  Herein, you will find a few arguments against the enforceability of such arbitration clauses.

1.         The Arbitration Agreement lacks consideration.

“Courts may not force parties to arbitrate disputes if the parties have not entered into a valid agreement to do so.”  Maestle v. Best Buy, Inc., Cuyahoga App. No. 79827, 2005-Ohio-4120.  In order to have a valid contract, there must be a meeting of the minds, which includes an offer, acceptance, and consideration.”  Reedy v. Cincinnati Bengals, Inc. (2001), 143 Ohio App.3d 516, 758 N.E.2d 678.  Accordingly, courts have held the “absence of consideration to support a contract is sufficient to permit its cancellation.” Software Clearing House, Inc. v. Intrak, Inc. (1990), 66 Ohio App.3d 163, 175.

Consideration consists of either a benefit to the promisor or a detriment to the promisee, which must be “bargained for.”  Carlisle v. T&R Excavating, Inc. (1997), 123 Ohio App.3d 277, 283-284.  Something is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise.  Id.

2.         The employee merely acknowledged his receipt of information presented to him rather than agreeing to the arbitration clause.

It is well settled that an arbitration agreement will not be enforced if the parties did not agree to the clause.  Harmon v. Phillip Morris Incorporated (1997), 120 Ohio App.3d 187, 189, quoting AT&T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643 (1986)(“a party cannot be required to submit to arbitration any dispute which he has not agreed to so submit”); see, also, Ervin v. American Funding Corp. (1993), 89 Ohio App.3d 519.

In Harmon, an employer distributed a brochure containing exclusive remedies for resolving employment termination disputes.  That employer further required the employees to admit receipt of same by written acknowledgment.  In that case, the employer allegedly gave its employees the option to agree to the dispute resolution program or reject the program and work elsewhere.  Harmon, 120 Ohio App.3d at 190. The Court reversed the trial court’s decision to stay proceedings pending arbitration. The Court rejected the notion that the employee’s acknowledgment of the pamphlet amounted to acceptance of the modification of employment terms.  It instead found that the employee “merely acknowledged his receipt and understanding of the items presented to him.  He never expressed assent to those terms.”  Id.  Thus, without a meeting of the minds, the parties had not formed a valid contract.

3.         The alleged arbitration agreement is void for failure to contain material terms.

“In addition to a meeting of the minds, a contract must also be definite and certain with respect to its essential terms.”  Episcopal Retirement Homes, Inc. v. Ohio Dept. of Indus. Relations (1991), 61 Ohio St.3d 366, 369. “Essential terms include such things as the identity of the parties to the contract, the subject matter of the contract, and consideration.” Alligood v. Proctor & Gamble Co. (1991), 72 Ohio App. 3d 309, 311, 312.

4.         The arbitration agreement does not include intentional torts.

An employer’s action in committing an intentional tort against an employee in the workplace necessarily occurs outside the employment relationship and cannot arise from it.   “When an employer intentionally harms his employee, that act effects a complete breach of the employment relationship, and for purposes of the legal remedy for such an injury, the two parties are not employer and employee, but intentional tortfeasor and victim. * * * The [employee’s] lawsuit has no bearing upon any question relating to employment.”  Brady v. Safety-Kleen Corp., 61 Ohio St.3d 624, 634, 576 N.E.2d 722 (1991).

5.         Employer has waived its right to invoke the arbitration agreement.

To assert waiver a party must prove two elements: (1) that the party waiving the right knew of the existing right of arbitration; and (2) that it acted inconsistently with that right.  Griffith v. Linton (1998), 130 Ohio App.3d 746.  “Active participation in a lawsuit … evincing an acquiescence to proceeding in a judicial rather than an arbitration forum has been found to support a finding of waiver.” Griffith, at 752.

To determine whether a defendant acted inconsistently with arbitration, the court should consider: (1) any delay in the requesting party’s demand to arbitrate via a motion to stay judicial proceedings and an order compelling arbitration; (2) the extent of the requesting party’s participation in the litigation prior to its filing a motion to stay the judicial proceeding, including a determination of the status of discovery, dispositive motions, and the trial date; (3) whether the requesting party invoked the jurisdiction of the court by filing a counterclaim or third-party complaint without asking for a stay of the proceedings; and (4) whether the non-requesting party has been prejudiced by the requesting party’s inconsistent acts.  Harsco Corp. v. Crane Carrier Co.(1997), 122 Ohio App.3d 406, 410, 701 N.E.2d 1040.

Please note that just because there is an arbitration agreement does not mean that it’s enforceable.  The foregoing are viable arguments against certain arbitration clauses.  Other arguments may include unconsionability (procedural and substantive), duress and undue influence.