Court Holds Arbitration Agreement That Permitted Modification By Employer To Be Unenforceable

Johnson v. Menard, Inc. involved a former employee’s lawsuit alleging discrimination. The employer unsuccessfully sought to compel arbitration, and the Missouri Court of Appeals affirmed the denial. The agreement included language providing for arbitration in accordance with American Arbitration Association rules, including the AAA provision that “[t]he arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement.”

However, the arbitration agreement also provided in its last sentence that ““I
UNDERSTAND THAT THIS AGREEMENT CANNOT BE MODIFIED EXCEPT BY THE
PRESIDENT OF MENARD, INC.,” which the court held “vested Menard, through its president, the unlimited and unilateral right to modify any part of the [agreement], including the delegation provision, at any time and without notice to Johnson.” For the court, this ability to unilaterally modify the agreement rendered unenforceable its provision delegating to the arbitrator the right to determine arbitrability, as well as leading the court to determine the arbitration itself was invalid.