/>iOn June 18, 2021, a group of ACE American Insurance Company employees filed a class action suit alleging that ACE misclassified them as exempt employees.
ACE moved to compel arbitration based on arbitration agreements that each of the plaintiffs had signed as a condition of their employment where they agreed to “submit [employment claims] to final and binding neutral third-party arbitration.”
The agreement made clear that employees “cannot bring any employment related claim in court,” and further stated that the “party who wants to start the Arbitration Procedure” is required to begin the process by filing a demand for arbitration, which in this case was within 30 days of the court’s order.
On March 14, 2023, the trial court determined that the case fell within the scope of the arbitration agreement, granted the motion to compel, and stayed the case pending the outcome of arbitration. The court did not clarify which party was required to actually start arbitration.
On August 24, 2023, the plaintiffs filed a motion asking the court to lift the stay, arguing that ACE was required to initiate the arbitration process as they were the party who wanted arbitration, and by failing to do so within the agreement’s 30-day period, ACE had waived its right to arbitrate. The trial court agreed with this reasoning and found that ACE’s inaction “was inconsistent with its right to arbitrate,” finding that even though the plaintiffs were the ones who initiated the claims, they did not want to arbitrate and in fact, wanted to continue to litigate the claims in court.
ACE appealed arguing that the court misinterpreted the contractual language. The appellate court agreed with ACE, finding the trial court erred by considering provisions of the arbitration agreement in isolation instead of construing the agreement as a whole. The agreement required the party who “wants” arbitration to initiate arbitration, but also states that if a plaintiff has “employment related legal claims, [they] will submit them to … arbitration.” The appellate court held that the term “want[ing] to start the Arbitration Procedure” could not refer to a preference for arbitration as the parties had contractually agreed to rule out litigation as a viable forum. Accordingly, it was the plaintiffs who were required to initiate the arbitration proceedings.
Implications for Employers
This decision highlights the importance of ensuring that arbitration agreements are clear on what procedures apply should an employee bring legal claims. Ambiguities about who must file for arbitration and what rules will apply during the arbitral process should be eliminated wherever possible.
