In Southard v. Newcomb Oil Company, LLC, the Sixth Circuit declined an employer’s invitation to send claims against it to arbitration. Noting that, “despite it being the titular term, the [Federal Arbitration Act] does not define arbitration,” the court explained that under applicable precedent “we evaluate whether an agreement qualifies as FAA arbitration based on ‘how closely it resembles classic arbitration,” i.e. “1) ‘a final, binding remedy by a third party,”2) ‘an independent adjudicator,’ 3) ‘substantive standards,’ and 4) ‘an opportunity for each side to present its case.’”
Turning to the ostensible agreement between the parties, the court explained that it “bears none of those hallmarks.” In reaching this conclusion, the court rejected the employer’s view that an agreement to arbitrate was embodied in the following:
First, in Southard’s application for employment:
As a condition of employment, I accept that any complaint or conflict that cannot be resolved internally may be referred to Alternative Dispute Resolution, unless prohibited by law, before any other legal action is taken.
Second, midway through the employee handbook:
As an employee of Newcomb Oil Co., you agree to Alternative Dispute Resolution a forum or means for resolving disputes, as arbitration or mediation, that exists outside the state or federal judicial system, unless prohibited by law, as a means to resolve any disputes and/or complaints that cannot be resolved internally.
Third, the final page of the employee handbook states:
If there is a conflict that cannot be resolved between the employee and the company, both agree that the matter will be referred to mediation.
According to the court, these provisions “make it apparent that Newcomb and Southard agreed to alternative dispute resolution generally, not arbitration specifically.” Holding “that the agreement does not resemble ‘classic arbitration” which requires “a final, binding remedy by a third party,” the court found that the employer “did not draft an arbitration agreement,” depriving it of the ability to “turn to the [Federal Arbitration Act] for its arbitration-specific remedies.”
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