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Federal Court Requires “Meeting of the Minds” To Enforce Arbitration Agreement Included in Employment Application

Last month, a federal court in Maryland denied an employer’s motion to compel arbitration even though the plaintiff executed an arbitration agreement the employer had included in the plaintiff's employment application.  The court found the agreement unenforceable because the parties did not have a “meeting of the minds” at the time the employer asked the plaintiff to complete the employment application.  This decision serves as an important reminder to employers to examine not just the content of the agreement itself, but also the context around which the contract is executed.

The Arbitration Agreement Is Part of a So-Called Employment Application

In Kennedy v. ADF MidAtlantic, LLC, the plaintiff worked for a Pizza Hut restaurant in Hagerstown, Maryland from 1992 through 2014.  In 2006, a new owner purchased the restaurant.  The outgoing owner asked the plaintiff to complete an employment application at the request of the new owner, ADF MidAtlantic, who “required biographical and background information related to each employee for its records.”  The plaintiff complied with the request and completed and executed the employment application, which included an arbitration provision.

After ADF MidAtlantic terminated the plaintiff in 2014, she sued claiming FMLA interference and retaliation, defamation, wrongful discharge, and violation of wage and hour laws.  The company pointed to the arbitration agreement claiming that an arbitrator and not a court should resolve the dispute.

The Court Refuses to Enforce the Arbitration Agreement

The Court noted that although the document at issue was entitled “employment application;” the plaintiff was not applying for employment at the time she completed it, nor did she view it as an employment application.  Instead, “she was already employed; she was not told her present employment was or would be terminated; she was not told she had to reapply for her then-present position.”  For that reason, the plaintiff could not have agreed to arbitrate her claims by signing the “employment application.”  The court could not find a “meeting of the minds” where the new owner thought that the plaintiff and other then-present employees were “applying for employment” with them, but the then-present employees were “led to believe they were just providing information to update employment records.”

Important Takeaways

Arbitration agreements should be presented to the employee through an explicit and obvious means, such as in an employment agreement, offer letter, or other agreement that must be signed as a term and condition of new or continued employment.  Doing so may assist an employer compel arbitration by showing that both employer and employee entered into the agreement with the same intent and understanding.

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Alta Ray