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Sixth Circuit Finds Agreement to Arbitrate – Even Where There Was No Signed Writing

The Sixth Circuit recently tackled the subject of opt-out arbitration and held that an employee can be compelled to arbitrate disputes, even in the absence of a signed agreement, where the employer provided notice of its offer to arbitrate and the employee accepts the officer by continuing employment without opting out.  In Tillman v. Macy’s, Inc., No. 11-2580, — F.3d — (6th Cir. 2013), the employee, Cecelia Tillman, filed suit against her employer, Macy’s, Inc., alleging that Macy’s had discriminated against her on the basis of race in violation of Title VII.  Macy’s moved to compel arbitration, arguing that Tillman had agreed to arbitrate all claims against the company by entering into a four-step dispute-resolution program called Solutions InSTORE, the last step of which was binding arbitration.  The Sixth Circuit agreed with Macy’s.

In deciding that Macy’s had provided sufficient notice of its offer to arbitrate disputes, the court found significant the variety of ways the company alerted employees of the Solutions InSTORE program.  First, Macy’s initially sent Tillman a mailing that described the dispute-resolution process in detail and stated that, although employees were automatically “covered” by arbitration, employees could opt out of the process.  This mailing also described the procedure for opting out and directed employees to return a form by a date certain in order to opt out.  Second, the store provided a mandatory video screening and brochure that described the program.  Third, after Tillman failed to return the opt-out form, Macy’s mailed her a brochure welcoming her to the program and notifying her that she had not returned the opt-out form.  Finally, Macy’s later sent another opt-out form along with a packet that stated that Tillman should return the opt-out form unless she agreed to be bound to arbitrate future disputes.

Although the plaintiff argued that this procedure did not amount to an offer to arbitrate, the Sixth Circuit disagreed.  Under basic contract law, Macy’s extensive notification system provided sufficient information about the arbitration process, the fact that agreement to arbitrate meant waiving the right to a jury trial, the ability to opt out, and the procedure for opting out.  Macy’s also effectively communicate the manner of accepting its offer—by not returning the opt-out forms.  The court held that all of Macy’s actions constituted sufficient notice of the program, distinguishing the case from the situation in which an employer’s dispute-resolution policy was not provided directly to employees, but was only vaguely referenced in an employee handbook.  In Tillman, the plaintiff could not, objectively, claim to have been unaware of the arbitration policy.

Furthermore, the employee’s conduct objectively suggested acceptance of binding arbitration.  The employee continued employment without returning the opt-out form—exactly as the brochures and mailings instructed her to do.  It did not matter to the court that the plaintiff claimed not to have received the mailings, because the company, having properly addressed and mailed them, was entitled to the presumption that she had in fact received them.

The court was also not swayed by arguments that the plaintiff had not voluntarily waived her right to a jury trial.  It noted that the terms of the waiver were clear and that the plaintiff had over a year to opt out, during which time she could have consulted an attorney.  Although the court recognized that opt-in schemes are less confusing than opt-out programs, it could not conclude that opt-out systems are insufficient.  While the decision is not groundbreaking, it is an excellent example of how a business should notify its employees of its offer to arbitrate disputes.

Diana M. Comes