Hoffman v. Aaron Kamhi, Inc.

Citations: 927 F. Supp. 640; 5 Am. Disabilities Cas. (BNA) 707; 3 Wage & Hour Cas.2d (BNA) 445; 1996 U.S. Dist. LEXIS 3600; 1996 WL 137495Docket: 95 Civ. 2752 (DC)

Court: District Court, S.D. New York; March 27, 1996; Federal District Court

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Defendants Turn On, Inc. and Aaron Kamhi, Inc. moved to compel arbitration and dismiss or stay the proceedings in an employment discrimination case brought by plaintiff Jerold R. Hoffman. The court addressed two main issues: the enforceability of the arbitration clause in Hoffman's employment contract and whether it covers his discrimination claims. The motion was denied because the arbitration clause was deemed ambiguous and did not specifically reference discrimination claims. Additionally, the legal statutes under which Hoffman sued were not in effect when he signed the contract, indicating he could not have intended to waive rights under laws that did not yet exist. Although the Federal Arbitration Act supports enforcing arbitration agreements, the court concluded that the arbitration agreement, while valid, did not encompass Hoffman's claims under the Americans with Disabilities Act (ADA) and the Family and Medical Leave Act (FMLA).

The enforceability of the arbitration clause is contested by the plaintiff on three grounds: (1) the agreement is claimed to be void under contract law; (2) defendant AKI is argued to be a non-party to the agreement; and (3) the agreement is asserted to no longer bind the parties. However, it is determined that these claims do not warrant invalidating the arbitration agreement. Under New York law, a contract is unenforceable only if its terms are excessively unreasonable or unconscionable, as established in *Sablosky v. Gordon Co., Inc.* The court found in *Sablosky* that an arbitration clause, even if drafted by the employer, is not inherently unconscionable without evidence of coercion or fraud, which the plaintiff fails to provide. The plaintiff's assertion of Turn On's unfair bargaining power is solely based on its status as his prospective employer, which is inadequate for claiming unenforceability.

Regarding AKI's ability to enforce the arbitration clause, it is noted that non-signatories can still be bound by arbitration agreements under certain conditions, such as where legal and factual claims against the non-signatory align with those against the signatory. Since Turn On is purportedly an agent of AKI, AKI can benefit from the arbitration agreement despite not being a signatory itself.

The plaintiff further contends that an employee handbook issued by AKI supersedes the employment contract; however, the handbook explicitly states it is not a contract and that any written agreements must be approved by the employer. Thus, the original employment contract remains effective.

Lastly, the plaintiff argues that the arbitration clause does not cover claims under the ADA and FMLA. The court agrees, noting that while arbitration agreements are broadly construed, the specific language of this agreement does not sufficiently encompass federal statutory claims, indicating that it does not extend to such claims.

The Second Circuit mandates arbitration for disputes unless it can be definitively determined that the arbitration clause does not cover the asserted dispute. A party cannot be bound to an arbitration agreement without having explicitly agreed to submit their specific claim to arbitration. The central issue is whether the employee waived statutory remedies under the ADA and FMLA by signing the employment contract. The Ninth Circuit emphasizes the necessity of a knowing agreement to arbitrate employment disputes to waive rights under civil rights statutes. The legislative history of the ADA indicates that arbitration of ADA claims requires an explicit, voluntary waiver of court claims. In this District, courts have enforced arbitration agreements that clearly notified employees of their waiver of rights to bring employment discrimination claims in federal courts. In contrast, the arbitration clause in the present case is poorly worded and ambiguous, failing to provide clear notice of a waiver of rights regarding employment discrimination claims. It only pertains to disputes regarding the Corporations or the interpretation of the Agreement, lacking references to civil rights statutes or termination conditions. Consequently, the clause does not adequately inform the plaintiff of a waiver of the right to litigate federal employment discrimination claims.

The agreement entered into by the plaintiff in 1986 predates the establishment of the ADA and the FMLA by nearly eight years, indicating that the arbitration clause in question did not intend to cover claims arising under these acts, as there is no reference to employment discrimination in the agreement. Consequently, the defendant's motion to compel arbitration of the plaintiff's claims under the ADA and FMLA is denied. 

Additionally, the plaintiff opposes the motion on the grounds that the Federal Arbitration Act (FAA) exempts certain employment contracts related to interstate commerce, but the Second Circuit has interpreted this exemption narrowly. The plaintiff, serving as a production manager, does not qualify for this exemption since his role is not closely linked to the physical movement of goods. 

Generally, federal employment discrimination claims, including those under the ADEA, are considered arbitrable. However, Congress has emphasized that decisions to arbitrate ADA claims must be made voluntarily, ensuring that arbitration clauses in employment contracts do not impede individuals from asserting their rights under the ADA.