It’s time for our annual holiday season blog on the status of arbitration agreement enforceability in Missouri. Last year we brought you “Missouri Supreme Court Punts Two Lawsuits in a Row, on Direct Flights to Arbitration,” which discussed two recent Supreme Court of Missouri decisions. One of those cases was State ex rel. Pinkerton v. Fahnestock, holding the incorporation of the American Arbitration Association’s (AAA) arbitration rules—and the delegation clause in those rules—would delegate threshold questions about contract enforceability to the arbitrator.
But Pinkerton wasn’t an employment case. This week, the Supreme Court of Missouri addressed arbitration agreements in the context of an employee-employer work relationship. In Soars v. Easter Seals Midwest (with a 5–2 majority), the court held that arbitration must be compelled by a trial court if the parties signed an arbitration agreement that contains a valid delegation clause mandating that the arbitrator has “exclusive authority to decide threshold issues of interpretation, applicability, enforceability, or formation.”
This referral to an arbitrator should occur even when a party challenges the validity of the arbitration agreement as a whole, including allegations such as the agreement lacks consideration or is unconscionable. This rule has been well established in decisions by the Supreme Court of the United States over many decades, but this was the first occasion the Supreme Court of Missouri had to apply the principle to employment relationships in Missouri.
The court also explained that an initial offer of at-will employment was consideration on which a contractual promise to arbitrate claims could be based. It had previously held, in Baker v. Bristol Care, Inc., that continued at-will employment was not good consideration. The court’s decision on this issue provides helpful guidance to employers and their employees on how to form a clear and enforceable contract between them in Missouri.
Another New Year’s Resolutions for Missouri Employers: Audit and Update Arbitration Agreements
Even well-drafted arbitration clauses can be difficult to enforce. The Soars decision could help employers seeking to enforce arbitration agreements in Missouri. As 2018 comes to a close and employers gear up for 2019, businesses may want to review their arbitration agreements to make sure they are drafted in a way that will allow the parties to enforce their arbitration clauses.
Most importantly, employers should consider incorporating, in all arbitration agreements, a provision that expressly provides for—and requires—that any controversy, claim, and dispute be gifted to the arbitrator in the first instance. Included among these controversies, claims, and disputes are any objections with respect to the existence, scope, interpretation, applicability, enforceability, formation, or validity of the arbitration agreement or to the arbitrability of any claim or counterclaim.
In promoting the enforceability of arbitration agreements, making these adjustments may go a long way in getting potential claims to arbitration.