Sixth Circuit Reverses Order Finding Employment Arbitration Agreement Void Due to Coercion

This article first appeared on the Carlton Fields webpage, here.

An employee sued her former employer and coworkers in the Eastern District of Michigan for sexual harassment, defamation, and for subjecting her to a hostile work environment. The employer argued that the employee’s claims fell within the scope of an arbitration agreement, but the district court held that the agreement was void because the employee had been coerced into signing it.

The employee argued that her boss told her that if she did not sign the agreement she would be fired. She stated that the agreement was presented to her in the middle of the workday, when she had little time due to her pressing work duties, and that her boss stood behind her and waited while she attempted to review it, ratcheting up the pressure. In addition, the plaintiff employee noted that she was a single mother with a disabled child and could not afford to lose her job.

The Sixth Circuit reversed, holding that “fear of financial ruin alone is insufficient to establish economic duress; it must also be established that the person applying the coercion acted unlawfully.” Where a party does not threaten anything that the party is not legally entitled to do, then there is no duress. Michigan is an at-will employment state, meaning that the employer’s conditioning the plaintiff’s continued employment on her signing the arbitration agreement did not amount to unlawful conduct. Therefore, the employee could not show that she was coerced into signing the agreement.

The plaintiff also argued that she did not knowingly and voluntarily waive her right to a judicial forum for her prospective claims under Title VII of the Civil Rights Act of 1964. The court applied a five-factor test to determine whether the waiver of Title VII claims was valid. The plaintiff had a high school-level education with some post-secondary education and experience reviewing and executing car sales contracts, which was held to be sufficient under the first prong. The court also found that the employee was given sufficient opportunity to review the contract, emphasizing the fact that she failed to request more time or the opportunity to consult a lawyer before signing. The court quickly dispatched the remaining factors, whether the agreement was sufficiently clear, whether sufficient consideration was provided, and the totality of the circumstances, and held that the contract was a valid waiver of the plaintiff’s right to adjudicate her Title VII claims in a judicial forum.

Solomon v. Carite Corporate LLC, No. 20-1020 (6th Cir. Nov. 23, 2020).

Benjamin Stearns

Benjamin Stearns’ practice focuses on regulated industries, primarily medical marijuana and property and casualty insurance. Benjamin works with state regulators to resolve compliance matters and negotiate enforcement actions. He also lobbies the Florida Legislature and has testified before legislative committees. In addition, Benjamin litigates insurance coverage matters and contests of…