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 Pittsburgh.

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.

In 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 arbitration policy.

“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.

In 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 laws.

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 law.

“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.

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