Most Texans involved in an employment or business dispute want their constitutionally guaranteed day in court in front of a jury of their peers. However, they are surprised to learn their agreements, employee handbooks or “terms and conditions” contain arbitration agreements forcing them to go through an arbitration process without a jury and having to foot some arbitrator’s bill.
These arbitration agreements are favored under Texas law and are being routinely enforced by Texas trial judges and appellate courts. However, there are still some situations where the agreements are unenforceable. The following are instances where an arbitration agreement was not enforced:
1. Invalid Agreement. Texas courts have found the agreement itself is not a valid agreement. The court can compel arbitration only after a party seeking to compel arbitration establishes there is a valid agreement to arbitrate and that the claims raised are within the agreement’s scope.
2. Outside the Scope. Texas courts have found an arbitration clause can be avoided if the dispute is outside the scope of the agreement.
3. Implied Waiver. Texas courts have found that a party can impliedly waive their right to arbitrate a claim. If a party substantially invokes the judicial process and that action was prejudicial to the party seeking to avoid the arbitration clause, the Court can deny arbitration.
4. Express Waiver. Texas courts have found that a party can expressly agree to waive or revoke an arbitration clause.
5. Non-signatory to the agreement. Texas courts have found someone who is not a signatory to the agreement may not be bound by the agreement.
6. The agreement is unconscionable. Unconscionability refers to the fairness of the arbitration agreement itself (substantive unconscionability) or the circumstances surrounding adoption of the arbitration provision (procedural unconscionability).
7. The arbitration agreement was signed under duress. Texas courts will find that an arbitration clause signed under duress is invalid. However, the Courts have held that the arbitration clause itself must have been signed under duress and not the contract. This standard has made it difficult to prove duress.
8. The arbitration agreement was fraudulently induced. Texas courts have found that an arbitration clause in unenforceable if the party seeking to avoid the agreement was fraudulently induced into entering the arbitration clause.
9. The signatory did not have the mental capacity to sign the agreement. If a person does not have the mental capacity to enter an arbitration clause, then the clause is not enforceable.
Texas law will routinely uphold arbitration clauses. However, before submitting to arbitration, all Texans who want their day in court should be sure that the agreement is enforceable.
It is tough but you can still avoid an arbitration clause.
Texas courts are routinely sending employment and business disputes to arbitration as a result of sometimes unknown or hidden arbitration clauses. However, there is still hope for those who want to stay in the judicial system and have a trial before a jury of their peers. There are still many ways to avoid an arbitration agreement.
On February 6, 2013 the El Paso Court of Appeals in In Delfingen US-Texas, L.P. v. Valenzuela upheld a ruling that that an arbitration agreement that was part of a “new employee packet” was procedurally unconscionable and could not be enforced. Ms. Valenzuela testified that she understood little English and when she signed the arbitration agreement, it was never explained to her. The court found that Ms. Valenzuela’s employer did not explain, discuss or translate the arbitration agreement and that the trial court could have found that employer affirmatively misled Ms. Valenzuela of the importance of the agreement. The court held that Ms. Valenzuela carried her burden of proving the arbitration agreement was procedurally unconscionable and could not be enforced.
Texas law makes it difficult to avoid arbitration clauses. But a careful review of the facts surrounding the agreement may still open some avenues to avoid them.