In a Halloween treat for employers, the Sixth Circuit ruled this morning that an employee had contractually agreed to arbitrate any employment disputes, by continuing her employment after having been notified of the employer’s mandatory arbitration program.

Cecilia Tillman v. Macy’s, Inc. is the latest in a line of cases analyzing the enforceability of mandatory arbitration clauses in employment.

Plaintiff Cecilia Tillman had been an employee of May Department Stores until 2005, when Macy’s merged with May and she became an employee of Macy’s.  Following the merger, Macy’s rolled out its Solutions inSTORE program, which included a four-step dispute resolution process, culminating in mandatory arbitration that would be binding on both Macy’s and the complaining employee.  By participating in the program, employees waived their right to file an employment dispute in court.  Disputes would be ruled upon by an arbitrator, with no right of appeal for either side.  Macy’s explained the program to its employees in a mailing and in a training video, further explaining that employees could opt out of the program if they completed and returned an opt-out form.

Tillman claimed she did not receive the mailing but admitted she attended the video training.  She admitted that she did not complete any opt-out form, but claimed that the company “breezed over” the mandatory arbitration information during training.  Tillman argued that merely continuing her employment should not be treated as a waiver of her right to file an employment claim in court.

Not so, ruled the Sixth Circuit.  The Court of Appeals applied basic contract formation rules and held that Tillman accepted Macy’s offer of arbitration by continuing to work after she had been informed of the program and the process for opting out.

In Tillman, the Court applied Michigan contract formation law to reach its decision that an arbitration contract had been formed, but the principles followed under Michigan law are not unusual.  Generally, when an offer is made and the offerree’s conduct is consistent with accepting the offer, a contract is formed.  The Court in this case ruled that Macy’s sufficiently explained its offer of mandatory arbitration and sufficiently explained to employees that they had to sign an opt-out form if they did not want to participate.  Tillman, the Court ruled, accepted Macy’s offer by continuing to work there without opting out.

This federal decision follows on the heels of last week’s ruling by the Court of Appeals of Ohio, Eighth Appellate District, that also ruled in favor of Macy’s and required a different plaintiff to arbitrate her claims under the same program.  In Luisa Cole v. Macy’s, Inc., the plaintiff claimed that she did complete an opt-out form but gave it to her supervisor instead of mailing it back to Macy’s as the form required.  Macy’s had no record of the opt-out form having been received, and the Court therefore ruled that she did not properly opt out.  By continuing her employment and not opting out, Cole had accepted Macy’s offer of arbitration and was therefore required to arbitrate any employment claims instead of pursuing them in court.

Key Takeaways:

Courts will consider an employee’s continued employment as the employee’s acceptance of an employer’s offer of mandatory arbitration, when the terms of the arbitration program are clearly explained to the employee, when the employee is provided an opportunity to opt out, and when the employee declines to opt out.

Many courts, in fact, have enforced mandatory arbitration programs, even when the employee was not offered an opportunity to opt out.

An employer’s decision whether to require its employees to arbitrate employment disputes, instead of heading to court, is a policy decision with advantages and drawbacks.

BakerHostetler’s Employment Law Group is available to help employers weigh the advantages and disadvantages of implementing such a policy, and can provide advice on how best to implement such a plan.