Court Enforces Arbitration Agreement, But Not Six-month Time Limit

 

A court ruled that a sales representative must arbitrate his Americans with Disabilities Act claim, but declined to enforce a provision in the arbitration agreement limiting the time he had to demand arbitration to six months. Clay v. Double E Co. (N.D. Ala. 2012).

Clay began working for Double E in 2009. He developed health problems in March 2010, which he claimed caused his work to suffer. Double E terminated Clay in July 2010 for poor work performance. 

The company’s arbitration agreement, which Clay signed, sets forth a three-step resolution process. Step one is informal resolution with a supervisor. Step two requires employees to submit a written complaint to Double E’s human resources department. Step three provides that either an employee or the company may submit a claim to arbitration, within a six-month limitations period.

Ignoring the agreement, Clay filed a disability discrimination charge with the Equal Employment Opportunity Commission and then sued. Double E moved to dismiss Clay’s suit and compel arbitration.

The court declined to enforce the six-month time limit in the arbitration agreement based on its findings that: 1) Clay retained the ability to file an EEOC charge, and 2) the EEOC charge process typically takes more than six months to complete. The court said that the time limit could cause an “unwary” employee who files with EEOC to be prevented from making a timely demand for arbitration.

However, the court said the unenforceability of the agreement’s six-month limit did not mean that Clay could bypass arbitration. Especially where the agreement expressly provided that the six-month limit could be severed if found unenforceable. Therefore, the rest of the agreement could be enforced.

The bottom line for employers is that, if attempting to limit the time employees have to seek arbitration in arbitration agreement, they should account for potential conflicts with employees’ EEOC rights.