An employer’s dispute resolution program, stating that it was not “intended to violate or restrict any rights of employees guaranteed by state or federal laws,” did not give rise to the right to a jury trial, and so an employee was required to submit his age discrimination claim to binding arbitration, a federal appeals court in New Orleans has held under Louisiana contract law. Klein v. Nabors Drilling USA, L.P., No. 11-30824 (5th Cir. Feb. 26, 2013). The Court found that the quoted language meant simply the employee would maintain his substantive statutory rights in the arbitration proceeding. Therefore, the Court reversed the lower court’s order denying arbitration with instructions to grant the employer’s motion to compel arbitration.

Background

Adam Klein worked for Nabors Drilling USA, L.P. As a condition of employment, Klein signed an Employee Acknowledgment Form indicating his agreement to resolve disputes through the Nabors Dispute Resolution Program. The Acknowledgment provided that nothing in the Program was “intended to violate or restrict any rights of employees guaranteed by state or federal laws” (the “rights disclaimer”). It also provided that Klein would be required to adhere to the Program and that its processes could involve “mediation and/or arbitration.” 

The Program provided that disputes are to be “finally and conclusively resolved” under it. The Program gave employees the option of requesting arbitration before the American Arbitration Association or before the Judicial Arbitration and Mediation Services. The parties also could agree to mediate their dispute at any time before the arbitration proceeding ended. However, if the parties could not agree on a method to resolve their dispute, it would be submitted to binding arbitration.

After the company terminated Klein’s employment, he sued the company for alleged age discrimination in violation of the Age Discrimination in Employment Act and the Louisiana Employment Discrimination Law. Nabors moved to compel arbitration and to stay the court proceedings. The district court denied the motion, finding the Program was not binding. The court also held the rights disclaimer was not intended to restrict Klein’s right to a jury trial. Nabors appealed.

Applicable Law

Under Louisiana law, “[i]nterpretation of a contract is the determination of the common intent of the parties.” La. Civ. Code Ann. art. 2045; see also Prejean v. Guillory, 38 So. 3d 274, 279 (La. 2010). To determine the parties’ intent, courts first look to a contract’s plain language. The court in Prejean stated, “The reasonable intention of the parties to a contract is to be sought by examining the words of the contract itself, and not assumed.” The words of a contract must be given their generally prevailing meaning and, if they are susceptible to different meanings, they “must be interpreted as having the meaning that best conforms to the object of the contract.” Additionally, the law provides that each provision must be interpreted in light of the other provisions so that each is given the meaning suggested by the contract as a whole. 

Arbitration Agreement Enforced

Klein argued he was not required to submit his claim to arbitration because the Program was not mandatory. He also argued that the rights disclaimer permitted the case to be heard in a judicial forum. The appellate court rejected Klein’s contentions. 

First, the Court noted the Program specifically provided that its proceedings were the “the exclusive, final, and binding method” of resolution. The Program further stated that, if the parties could not resolve their dispute through a non-binding mechanism, such as mediation, their dispute “shall be arbitrated.” Accordingly, the Court found it “unambiguous” that the parties intended for arbitration to be the final, binding method of dispute resolution. That the Program permitted other methods of dispute resolution, the Court determined, did not change its analysis. Indeed, the Court noted that parties “are always free to attempt to work together and reach a mutually beneficial result before absorbing the not insignificant costs associated with arbitration.” 

The Court next examined whether the rights disclaimer provided a right to a jury trial. It found that Klein’s interpretation created an unnecessary conflict with the Program’s unambiguous language requiring arbitration. Instead, the Court determined the rights disclaimer applied only to substantive rights that Klein would have had in a judicial forum. It noted that this interpretation was consistent with both the Program’s language and the law governing arbitration agreements. See, e.g., Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985) (“By agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum.”). Accordingly, the Court concluded that Klein was required to submit his age discrimination claim to arbitration, reversed the order denying arbitration, and returned the case to the trial court.

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This decision re-affirms that arbitration remains a favored policy and is a positive development for Louisiana employers with alternate dispute resolution programs. “Many jurisdictions have narrowed the protections afforded by compulsory arbitration provisions in employment agreements,” noted Charles Seemann, a partner in Jackson Lewis’ New Orleans office. “In Nabors, the Fifth Circuit declined to interpret of such an agreement to nullify the arbitration requirement. It indicates that courts will usually honor arbitration agreements, both in letter and in spirit, at least in the Fifth Circuit,” he added. Nevertheless, employers should work with counsel in developing alternate dispute resolution programs to limit potential concerns over enforceability. While arbitration is favored, in an area where the law changes frequently, it is imperative to monitor with the developing case law to ensure programs are up-to-date and enforceable.