September 08, 2006
Jury trial waivers might just be the next "alternative dispute resolution" trend in employment law, particularly since mandatory arbitration agreements are not the panacea that many employers hoped for in the 1990s.
The majority of jurisdictions allow such waivers (at least in the commercial contract context), and only the California and Georgia state supreme courts have ruled that pre-dispute jury waivers violate their respective state constitutions. Grafton Partners L.P. v. Superior Court, 116 P.3d 479 (Ca. 2005); Bank South, N.A. v. Howard, 444 S.E.2d 799 (Ga. 1994).
Other jurisdictions determine whether a waiver should be enforced based on varying tests and burdens. For example, when deciding whether to enforce a jury trial waiver, the federal courts in Illinois consider the negotiations between the parties, the conspicuousness of the provision, the relative bargaining power of the parties, the business acumen of the party opposing the waiver, and whether counsel for the opposing party had an opportunity to review the agreement. Whirlpool Financial Corp. v. Sevaux, 866 F. Supp. 1102, 1105 (N.D. Ill. 1994).
A federal court in Iowa enforced a waiver in the employment context because the employee (albeit a highly-educated surgeon) executed a knowing and voluntary waiver of her right to a jury trial, the employee negotiated other terms of the contract, and the waiver provision was in capitalized print and conspicuous. Morris v. McFarland Clinic P.C., 2004 WL 306110 (S.D. Iowa 2004).
According to the 10th Circuit, agreements that include a jury trial waiver are not contrary to public policy. Telum, Inc. v. E.F. Hutton Credit Corp., 859 F.2d 835, 837 (10th Cir. 1988). Nonetheless, these provisions are not automatically enforced; a Colorado federal court enforced a waiver provision - but only after indulging "every reasonable presumption against waiver" and placing the burden of proving a knowing and voluntary agreement on the party trying to enforce the waiver. Dreiling v. Peugeot Motors of America, Inc., 539 F. Supp. 402 (D. Colo. 1982).
On the flip side, the 6th Circuit presumes enforceability of a contractual jury trial waiver - "in the interest of liberty of contract" - unless the objecting party meets a burden of demonstrating that consent to the waiver was "not knowing and voluntary." K.M.C. Co. v. Irving Trust Co., 757 F.2d 752, 758 (6th Cir. 1985).
In Missouri, parties can contractually waive their right to a jury trial prior to a dispute between them if done knowingly and voluntarily. Malan Realty Investors, Inc. v. Harris, 953 S.W.2d 624, 626 (Mo. banc 1997). As long as "the contract terms are unequivocal, plain, and clear, the court is bound to enforce the contract as written." Id. at 626-27.
Increasing Use of Waiver
While jury trial waivers have not traditionally been used in agreements between employers and employees, they are increasingly being used in the workplace. A result, perhaps, caused by the arbitration process often proving to be an unsatisfactory double-edged sword for employers.
Arbitration can be much more expensive and time consuming for employers than they originally expected. Employers cannot escape engaging in some cognizable level of discovery. Most arbitrators do not entertain or grant dispositive motions, which are routinely filed by employers in discrimination cases.
Another problem with using an arbitrator to decide employment disputes is the inherent lack of meaningful appellate review. An arbitration award is final and binding on both parties unless it is procured by corruption or fraud, the arbitrator was obviously biased or engaged in specific misconduct, or there was no valid arbitration agreement between the parties.
In some states, such as Missouri, employment cases are shifting into the state courts based on perceived advantages for employees under state anti-discrimination laws. In some state court jurisdictions, the juries are much less predictable than their federal counterparts that draw from a much larger geographic area.
In light of these concerns, it comes as no surprise that employers might be interested in requiring jury waivers from their employees as a condition of employment. In most jurisdictions, after all, it is the jury's - not the judge's - unpredictability that concerns employers.
Although employees might prefer a jury in a perfect world, they might still choose the option of judge-tried cases in lieu of arbitrations. As compared to arbitration, a judicial forum provides benefits to both sides, and the discovery, motion and trial procedures are already well-defined and evenhanded.
Employees without an attorney may benefit from a judge's statutory ability to appoint an attorney to represent them (unavailable in the arbitration context). The elimination of voir dire, jury instructions, sidebar conferences and motions in limine would certainly lead to a shorter and less-expensive trial.
Waivers Must Meet Strict Requirements
Employers and employees should be allowed to jointly and voluntarily waive their rights to a jury while retaining the court system as the forum for resolution of their dispute. Of course, arbitration is, in essence, a waiver of the right to both a judge and a jury, and that ADR tool has clearly been judicially and legislatively endorsed.
Courts generally look to the following factors when deciding whether a jury waiver is knowingly and voluntarily made:
Employers can easily draft clear and unambiguous language that everyone understands and position the jury waiver provision in a conspicuous place, such as immediately above the signature line. However, equalizing the bargaining power between employers and prospective employees may be more difficult.
A job applicant essentially has two choices - either decide to apply for work elsewhere or negotiate for better pay, benefits or other terms. Allowing the prospect to negotiate some terms of the employment relationship serves to alleviate a court's concerns about the difference in bargaining power.
Furthermore, instructing the applicant or employee that they should discuss the terms of the agreement with an attorney and do not have to make an on-the-spot decision, will lessen the effectiveness of any arguments that employees are not as sophisticated as employers or that they were coerced into signing.
In Harris, supra, the court noted that the jury waiver provision "was not buried" in the agreement, was immediately above the signature lines, and "[e]ven if the defendant did not read the rest of the lease, it would be difficult to miss this provision." Additionally, the defendant in Harris retained an attorney to review the agreement, which "courts have deemed significant in determining whether there was unequal bargaining power of the parties."
Drafting Enforceable Waivers
Because all contracts require "consideration" from both parties, employers are wise to obtain the agreement of applicants and new employees at the time they are hired as a condition of their employment. The decision to employ those employees likely provides sufficient consideration to support the agreement.
When an employer wishes to have current employees waive their rights to jury trials, the best approach might be to offer the waivers in conjunction with promotions, raises, bonuses or other benefits. Although continued employment by existing employees might provide adequate consideration for a valid waiver, one can easily see how forcing a current employee to sign a waiver under threat of immediate discharge could constitute undue duress and render the waiver unenforceable.
Jury trial waivers should be drafted as separate documents and not incorporated into employee handbooks (which are usually not binding contracts). Employers can also add waiver language to employment applications so that any claim brought by the applicant relating to the hiring process is covered.
Ultimately, the agreement must serve as a mutual contractual promise to decline a jury for any claims brought by either party.
Within the agreement itself, certain statements should be bolded, made in all caps and/or typed in a larger font. For example, include language such as "THIS CONTRACT CONTAINS A BINDING JURY TRIAL WAIVER PROVISION WHICH MAY BE ENFORCED BY THE PARTIES."
Making the waiver agreement a separate document alleviates any concern or claim that the waiver language is inconspicuous or somehow buried in a group of other terms and promises.
A broad statement, e.g., "this waiver includes all claims and causes of action based on federal, state or local law and in any way relating to the application process, the employment relationship, and the termination of that relationship," should encompass the possible disputes. Employers might also include the specific elements required by the Older Workers Benefit Protection Act if they want the waiver to cover federal age discrimination claims.
It is important to include claims by or against entities and individuals related to, or associated with, either party, such as subsidiaries, divisions, successors, officers, directors, agents, or spouses.
The following are some additional terms and language to consider including in a waiver agreement:
If employees can waive their rights to a jury trial, the main reason for some employers running towards arbitration as an ADR tool will disappear. In the end, the courts must decide whether to approve this mechanism and accept cases on a judge-tried basis, or whether to reject the waivers and allow arbitration as the only option for employers and employees to bypass a jury.
James M. Paul represents employers nationwide in all aspects of labor and employment law and litigation as a member at Lathrop & Gage L.C. in St. Louis, and he also serves as the chairperson of the Labor and Employment Law Committee of The Missouri Bar. He can be reached at [email protected] or (314) 613-2524.