Fired Employee loses to Employer on Arbitration Clause

Carol Keough April 2, 2013

Gary Klein worked as a floor hand on a drilling rig for Nabors Drilling USA L.P. (Nabors).  Nabors asked him to sign an acknowledgment, as a condition of his employment, that he would agree to bring all disputes through the Nabors Dispute Resolution Program (Program).  At some point Nabors fired Mr. Klein.  Believing that he was fired because of age, Mr. Klein brought a lawsuit against Nabors in Louisiana for discrimination under the Age Discrimination in Employment Act (ADEA).  Based on Mr. Klein’s acknowledgement, Nabors moved to compel the suit to arbitration.  Generally arbitration agreements are favored by the courts.  However, here the trial court reviewed the acknowledgement which appeared to allow for an employee to exercise all of his state and federal rights which the court interpreted as the right to a jury trial.  Since Nabors used permissive words such as “may include mediation and/or arbitration,” the trial court was unpersuaded that arbitration was mandatory.

On February 26, 2013, the Fifth Circuit Court of Appeals disagreed.  The Fifth Circuit opinion looks at Louisiana contract law examining the acknowledgement and Program documents as a whole  and found the unambiguous intent of the agreement was that arbitration was to be the final binding avenue for dispute resolution.  Mr. Klein was ordered to take his claim to arbitration.  This case is a good example of what can happen when agreements are drafted in such a way that the language is confusing as to the intent of the parties to the agreement.  If the requirements are mandatory, then the drafter should use the word “shall” and not “may”.  In addition, Nabors could possibly have saved the cost of this litigation by making sure that the parts of the agreement were consistent.  Nabors was saved because the Program did not provide for a judicial resolution of a dispute anywhere in the documents.   That left open the door for the Fifth Circuit to find the intent was for binding arbitration.  Contracts should clearly say what they mean so court intervention is not necessary.

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