The Missouri Court of Appeals rang in the New Year by issuing an opinion that continues the trend in Missouri of restricting the enforceability of arbitration clauses. In light of this decision, employers should revisit their arbitration agreements to determine whether they are still enforceable under Missouri law.
In Jimenez v. Cintas Corporation, an employee had signed an agreement at the time of her hire that required the arbitration of any legal dispute arising between the parties. The arbitration agreement, however, contained an important (and very common) exception: the employer reserved the right to go to court, rather than before an arbitrator, to obtain injunctive relief in order to enforce a non-compete agreement that applied to the employee. This type of exception is commonly included in arbitration agreements with provisions related to non-compete covenants because it is often difficult to obtain timely preliminary relief in arbitration, as it takes some time to select an arbitrator.
After her discharge, the employee filed a lawsuit alleging discrimination and harassment in violation of the Missouri Human Rights Act. The employer moved to compel arbitration, citing the arbitration agreement. The trial court refused to compel arbitration, and the Court of Appeals affirmed the trial court’s decision. The appellate court held that the employer had not provided adequate consideration to create a binding contract with the employee.
In declining to enforce the arbitration agreement, the court reached two conclusions that will further restrict the enforceability of arbitration agreements in Missouri. First, the court held that at-will employment—even “new” or “future” employment—does not constitute valid consideration necessary to form a contract. Second, the employer’s mutual promise to arbitrate was also insufficient to constitute consideration because the employer had reserved the right to litigate in court to enforce its non-compete. The court held that the agreement lacked “mutuality of obligation,” since the employer had an option to proceed in court, while the employee did not.
According to Eric A. Todd, managing shareholder of the St. Louis office of Ogletree Deakins, “It is common for arbitration agreements between employers and employees to include an exception for violations of a non-compete. In light of this recent decision, employers would be well-advised to reevaluate those provisions and the enforceability of their arbitration agreements with employees.”