By Gary Chester, Senior Writer
The law tends to favor arbitration provisions because arbitration is an efficient means of resolving contract disputes. But does the general rule hold for civil rights claims? According to the Ninth Circuit, the issue is hardly a slam-dunk for employers, as discussed in Schweyen v. University of Montana-Missoula, 2022 U.S. Dist. LEXIS 81810 (D. Montana, May 5, 2022).
The Facts
In July 2016, Robin Selvig, for 38 years the women’s head basketball coach at the University of Montana-Missoula, announced his retirement. About a month later, the University hired longtime assistant coach Shannon Schweyen to replace him. Schweyen signed a three-year contract containing a mandatory arbitration provision.
The arbitration clause reads as follows: “If any dispute arises under this Agreement, the parties agree to attempt to resolve the dispute in good faith as follows: 1. First, by informal negotiation. 2. If informal negotiations fail to resolve the dispute, the parties agree to seek mediation using a mediator acceptable to both parties. 3. If mediation fails to resolve the dispute within 30 days of initial mediation session, the parties agree to submit to binding arbitration under the provision of the Montana Uniform Arbitration Act, Title 27, Chapter 5 MCA.”
Despite three losing seasons, the University renewed Schweyen’s contract for the 2019-2020 season. The Grizzlies improved to 17-13, but the University replaced Schweyen with Mike Petrino, who guided the team to a 12-11 mark in 2020-2021 before improving to 19-11 last year. After the University did not renew Schweyen’s contract, she filed a civil complaint against the University alleging sex discrimination in violation of Title VII of the Civil Rights Act of 1964.
The complaint alleges the University engaged in sex discrimination by: (1) more harshly evaluating her performance as compared to the performance of her male counterparts; (2) targeting her for criticism because of her sex; and (3) not renewing her contract because of her sex.
The University moved to compel arbitration based on the dispute resolution provisions in both contracts. Schweyen opposed the motion, noting that she was not represented by an attorney in contract negotiations and the University never explained the arbitration provision to her.
The Legal Arguments
The governing statute in federal court is the Federal Arbitration Act, or FAA. The FAA states that a written arbitration provision in a contract “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” [9 U.S.C. § 2.]
Schweyen argued that the arbitration provisions are unenforceable because: (1) the so-called Franken Amendment bars the University from requiring mandatory arbitration of Title VII claims; (2) she did not knowingly and voluntarily waive her rights under Montana law in agreeing to arbitrate; and (3) the University cannot prove a knowing and explicit waiver of Schweyen’s rights under federal law.
The Franken Amendment to the 2010 Defense Appropriations Act restricts certain federal payments to defense contractors who compel employees to arbitrate Title VII claims. Since the University was under various contracts with the Department of Defense, Schweyen asserted that the Amendment prohibits the arbitration provision. The University argued that even if the Franken Amendment applies, it does not invalidate the arbitration provision in her employment agreement.
The court agreed with the University, recognizing that the Amendment addresses only potential breaches of contract between contractors and the DOD, and permits the DOD to withhold payments due to contractors. The Amendment does not afford aggrieved employees a remedy. The court stated that “neither the Franken Amendment itself, or the implementing regulations cited herein, provide Schweyen with enforcement rights when the University flouts such contractual obligations.”
The court also rejected Schweyen’s argument that Montana enforces an arbitration clause only if the agreement is “voluntarily, knowingly, and intelligently” made, and the University cannot meet that standard. However, the court ruled that the provisions of the FAA preempt state law.
Schweyen’s third argument, that she did not waive her rights under federal law, was more complex. The court discussed at length the seminal cases of Prudential Ins. Co. v. Lai, 42 F.3d 1299 (9th Cir. 1994) and Nelson v. Cyprus Bagdad Copper Corp., 119 F.3d 756 (9th Cir. 1997). These precedents make it clear that a broad waiver of the right to a judicial forum in exchange for employment does not include Title VII or other civil rights claims.
The court ruled in favor of Schweyen, stating: “Nelson makes the standard clear, ‘[a]ny bargain to waive the right to a judicial forum for civil rights claims … in exchange for employment or continued employment must at the least be express: the choice must be explicitly presented to the employee and the employee must explicitly agree to waive the specific right in question.’”
The court concluded that the arbitration provision may have notified Schweyen that she was required to arbitrate contractual disputes relating to her job as head women’s basketball coach, but “[n]othing in the agreement explicitly notified her that non-contractual employment disputes, such as a Title VII claim, would have to be arbitrated.”
The Takeaways
- Although the court permitted the lawsuit to continue, it is still advisable for a contract employee to use an attorney to review a proposed contract before signing on the dotted line.
- Attorneys for employers should update employment contract forms frequently so all provisions comply with state and federal law.
