A MARRIAGE MADE IN HEAVEN, MODIFIED ON EARTH, AND STUCK IN PURGATORY

By: Antonio D. Robinson

Employment relationships, like marriages, don't always work out. At the beginning of any relationship, we always hope for the best, but often have to prepare for the worst. Like a prenuptial agreement for the betrothed, an arbitration agreement is one way an employer and applicant can plan for future disputes. Many employers consider arbitration an easy, cost-effective, private way to bring an end to what has become an unproductive employment union. However, if you don't cross your t's and dot your i's when putting the agreement in writing, a discharge can become just as ugly as a divorce.

The Prenuptial

A Christian-based elementary school eyed an attractive candidate for its top job―principal. After the courting process, the elementary school extended an offer, which was accepted. Upon consummating the relationship, the school and the new principal entered into a written employment contract containing a provision that provided for “biblically-based mediation.” No, there wasn't a fire and brimstone requirement, but everyone was subject to the Golden Rule.

Referring to passages of scripture, the mediation agreement purported to provide a way for the school and its new principal to resolve any employment disputes in accordance with biblical tradition. The agreement contemplated mediation, initially, and, if necessary, arbitration. The parties also agreed not to sue each other, except to enforce the agreement's terms.

Irreconcilable Differences

As quickly as the relationship began, it started to deteriorate. Only a few months after starting her job, the principal was told the relationship was not working out. While the school offered to continue paying the principal’s salary and benefits, it would do so provided she wouldn't return to the school. Breaking what the school considered to be one of the Ten Commandments, the principal sued the school. In response, the school asked the court to make the former principal proceed first with mediation, to be followed by arbitration only if it became necessary. The court agreed.

Self-Help Offers No Cure

After mediation failed, the estranged parties proceeded with arbitration. Before doing so, however, the parties entered into another written agreement, this time a form arbitration agreement. The school and the principal agreed to change the form by crossing out a provision that prevented either party from using any confidential testimony from the arbitration in any potential court proceeding. Second, they added a provision that neither party waived the right to appeal.

Once the ground rules were set, the parties conducted an arbitration that lasted six days. After all was said and done, the principal won her claim against the school. The arbitrator said the school didn’t resolve its initial conflict with the principal according to scriptures found in the mediation agreement. The school asked the arbitrator to reconsider, but he refused.

Divine Intervention

Still unhappy with the results of the arbitration, the school continued its efforts to have the decision set aside. It asked a federal trial court to reverse the arbitrator’s decision. The school argued that the written modifications to the arbitration agreement allowed the trial court to revisit the substance of the claim, instead of limiting its review to the correctness of the arbitrator’s decision. The trial court declined to expand its review of the dispute, sending the school to federal appeals court in New Orleans for a second opinion.

At the outset of its review, the appeals court explained the general role courts play in reviewing arbitration decisions. Specifically, the appeals court noted that courts can only change an arbitrator’s decision when (1) the arbitrator is corrupt, (2) the arbitrator was guilty of misconduct during the proceeding, (3) the arbitrator exceeded his or her authority, or (4) the arbitrator acted with a disregard for the law. This general rule is good to remember when opting for arbitration because in most cases you will be stuck with the arbitrator’s decision absent an abuse of his authority.

However, the appeals court explained that the rules can change if the terms of an arbitration agreement are unclear. The court then examined whether the parties' modifications to the agreement in this case had that effect. The court further explained that courts will look beyond the face of an unclear agreement to determine the intent of the parties. What’s more, a court’s reviewing authority can be expanded if the parties choose to expand that authority in the agreement.

With respect to this case, the court suggested that by adding language to a form contract that otherwise contained no provision concerning appeal of an arbitration award, the parties intended to expand the scope of judicial review. The court also noted that the parties agreed to allow it to consider evidence from the arbitration.

Still, the appeals court decided that it needed more information about the intent of the parties before it could make a decision about the scope of its review, concluding that the agreement was ambiguous regarding its authority. So, for a resolution of that issue, the court sent the case back to the trial court for further evidence and consideration.

Prescott v. Northlake Christian School, 369 F.3d 491 (5th Cir. 2004).

Not Another Messy Divorce

Not all employment relationships will work out―sometimes for the better and other times for the worse. When a separation isn't amicable, many of you rely on arbitration agreements to avoid the publicity, cost, and time associated with litigation. Usually, these agreements accomplish your objective. As illustrated by the case above, however, relying on forms and less than clear modifications to form agreements can send you right into public, costly, and time-consuming litigation.

How can you avoid that situation? Be smart and never use form agreements or revise or edit any agreement without consulting your labor counsel. It can be tempting to draft agreements, rely on forms, or make changes yourself when time is short or in special circumstances. Resist the temptation. As illustrated by this case, you could end up in a war-of-the-roses instead of a peaceful separation.