December 1, 2002
Avoiding Lawsuits is a service of the employment law training and consulting firm of Counsel Consulting Group LLC and the law firm of Powell, Trachtman, Logan, Carrle & Lombardo, P.C.
SECRET WEAPONS:
HOW TO USE YOUR EMPLOYMENT APPLICATION
FORM TO AVOID LIABILITIES
Imagine that you're an employer, and one of your employees, who lost a leg in a tragic accident, has filed an Americans With Disabilities Act lawsuit against you in federal court, a month after you fired him. The employee claims that you discriminated against him because of his disability. The truth is that the employee was a long term incompetent who cost you a ton of money, you gave him chance after chance to improve his work, and you really did nothing wrong.
When you consult with your lawyer, however, you get some troubling advice. "Technically," your lawyer tells you, "you're absolutely in the right. But there's going to be a lot more employees than employers on the jury, and this guy is going to get their sympathy. The jury will look at it as a battle between a fat cat, and a disabled little guy. You could get hammered. We need to settle."
Your blood starts to boil. What good is the law if it can be so easily perverted and turned on its head? Understandably, you feel taken advantage of by the "system."
A frequent response by employers facing this dilemma has been to search for ways to channel employee suits away from juries and into arbitration where (they hope) there is a greater likelihood of obtaining a logical decision based on law, unbesmirched by sympathy and bias. But can you take away an employee's right to a jury trial? We addressed this important subject in the Avoiding Lawsuits issue of April 1, 2001 ("Employee Lawsuits and Runaway Juries - The Supreme Court Helps Employers Manage the Risks"): in March 2001, the United States Supreme Court ruled (by a 5 to 4 vote) that a properly-drafted provision in an employment agreement that mandated arbitration in lieu of a jury trial is enforceable.
That was a landmark decision, but it had limited, practical application. Many employers don't use employment agreements for the majority of their employees. For such employers, the prospect of signing up each rank and file employee to a formal employee agreement would be awkward and complicated. Would the employees sign? What might they ask for as a condition of signing? Won't the request that they sign such a document raise questions and discontent?
Is there an easier way? There just might be.
Virtually every business requires that each prospective employee sign an employment application. By their nature, employment applications do not raise suspicions. But suppose you revised your employment application form so that it included a paragraph stating that, as a condition of employment, each applicant waived their right to a jury trial, and agreed that all employment-related disputes be decided by an arbitrator - if the employee signed the application, would it be enforceable?
In a victory for employers, the New Jersey Supreme Court, in the recent case of Martindale v. Sandvik, Inc., ruled that an employment application containing such a provision is enforceable.
The plaintiff/employee in the case had challenged the validity of the provision, claiming that she really had no choice in the matter - the provision was presented as part of the boilerplate, and was not something she had really "agreed" to. The right to a jury trial, she argued, ought not to be so casually discarded. However, the Court noted that the language of the provision was broad and clear, it included safeguards that permitted the employee to take the application home and consult with an attorney before signing it, and the employee was given the opportunity to ask whatever questions she desired.
Bottom line: the employee could have refused to sign the application if she wanted to but, having voluntarily signed it after the opportunity to seek legal advice and obtain information, she was bound by it.
SUMMARY AND SIGNIFICANCE: Martindale v. Sandvik, Inc. is a New Jersey decision. It may or may not be followed by other courts and, ultimately, the United States Supreme Court (already divided 5-4 on the general subject) may have to clarify when and how jury trial waivers and arbitration decisions can be foisted on employees. For now, however, the prospect of using employment applications as a secret weapon in the effort to avoid and minimize employment practices liabilities cannot be ignored. The decision makes it easier than many lawyers ever imagined it would be for employers to opt out of a jury system that frequently elevates sympathy and bias over the hard, cold facts.
But just because it's easy does not necessarily mean it's best to opt for arbitration. Arbitration is, itself, far from a perfect system. Maybe a middle ground is appropriate - stick with the judicial system, but require a waiver of the right to a jury trial so that the case is heard by a judge without a jury. You'll need individualized advice to decide what is best for your business.
And don't forget that this is an area of law that is morphing all the time. Employers will need to seek the advice of - and stay in touch with - experienced employment law counsel in order to maximize the chance that whatever they choose to do will meet the law's requirements.
One more point is worth considering as well. If you can use an employment application in this way, can you use it for other purposes as well? How about to protect trade secrets? To forestall an employee from working for a competitor? And what about other, similar, forms, like your credit application? Can you weave some magically-enforceable provisions into that form - maybe a personal guaranty of your receivables? The answers differ from state to state, and sometimes there are no clear answers. We have, for many years, drafted such seemingly-innocuous forms in ways that give our clients an unexpected leg up in some of their most difficult business situations. Let us know if we can help you.
Powell, Trachtman, Logan, Carrle & Lombardo, P.C. is a full service law firm with offices in suburban Philadelphia, PA, Harrisburg, PA and Cherry Hill, NJ. Powell Trachtman represents a variety of commercial enterprises, entrepreneurs and business executives in respect to their litigation, litigation avoidance planning, business formation, business transactions, estate and tax planning, and other needs. We are also approved defense counsel for numerous insurance carriers in matters pertaining to professional malpractice, products liability, employment practices, directors and officers liability, and many other fields. For more information, contact us at info@powelltrachtman.com and visit our website at www.powelltrachtman.com.
