PITTSBURGH – Two Education Management Corp. employees have been given the green light to sue their employer in court because they opposed a
policy requiring that disputes be sent to binding arbitration.
“This case highlights that courts will not always ‘rubber
stamp’ arbitration and other alternative dispute resolution agreements,” Meredith-Anne
Berger, an associate at Seyfarth Shaw LLP, told the Pennsylvania Record.
“Courts in some circuits favor arbitration,
but this case may signal the Third Circuit is going in a different direction.”
Michael Scott and LaMont Jones both worked as assistant
directors of admissions at an Education Management subsidiary, the Art Institute of
The U.S. Court of Appeals for the Third Circuit ruled recently that
Scott and Jones could take their claims against Education Management to court.
Both Equal Employment Opportunity Commission complaints allege that the
plaintiffs were treated unfairly in performance reviews because of their ages.
addition, Jones’ complaint raises allegations of racial discrimination.
After the plaintiffs’ attorney told Education
Management, on behalf of Jones, that the policy requiring claims of
“discrimination, harassment, retaliation, wrongful termination or other alleged
unlawful treatment under state, local or federal law” to be resolved through
binding arbitration was illegal, both EEOC complaints were amended. The amended
claims tacked on allegations of retaliation in connection with the mandatory
“Alternative dispute resolution is viewed by some employers
as a confidential and cost-effective way to resolve employment disputes,”
Berger said. “It gives employees a forum in which to air their complaints
without resorting to litigation, and the employer can rest assured that its
name will not be tarnished in the public eye.”
The Third Circuit ruling overturns one entered by the U.S.
District Court for the Western District of Pennsylvania. The lower court
dismissed both cases, saying that the decisions by Scott and Jones to continue
working for Education Management constituted consent to the policy.
addition, the district court ruled that the EEOC claims were covered by the
alternative dispute resolution policy.
The Third Circuit disagreed with the district court’s
reasoning that the decision by Scott and Jones to stay at Education Management
automatically meant they consented to the arbitration policy.
“In this case, the court focused on the issue of consent,”
Berger said. “Because the plaintiffs voiced their objections to the
implementation of the policy, the fact that they continued to work after the
arbitration policy was put into place was not dispositive of whether
arbitration was favored.”
When implementing an alternative dispute resolution policy, Berger
said employers should know that if employees will not agree to the policy, they
may freely terminate the employee, so long as it would not violate any other
In this case, Berger said terminating the plaintiffs for refusing to sign
the policy would have led to a retaliation claim, because the plaintiffs had
already filed charges with the EEOC, which is “protected activity” under the
“It is only where the employee disagrees with the policy,
and continues to work without action on the employer’s behalf, that employers
can wind up in a situation where one or two employees are carved out of the
policy,” Berger said.