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Title Court Upholds Mediation and Binding Arbitration Agreement
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Court Upholds Mediation and Binding Arbitration Agreement

Over the years, ACSI has encourages schools to use a Mediation and Binding Arbitration Agreement in employee contracts. In this case, the courts agreed and upheld the agreement in the contract.

Dorothy Easterly was a teacher at a Christian school in Indiana for nearly 20 years. Each year, she received a contract to teach. In the spring of 2007, she was offered a contract that she accepted for the fall of 2007. However, in July 2007, the school revoked Easterly's contract and offered her a position that paid a substantially lower salary. Easterly sued, alleging that in so doing the school not only breached the contract, but also discriminated against her on the basis of her age and disability in violation of the Age Discrimination in Employment Act of 1967 (ADEA) and the Americans with Disabilities Act of 1990 (ADA).

Her last few employee contracts, including the one at issue in this case, contained the following provision:

I agree to resolve differences with others (parents, fellow-workers, Administration) by following the biblical pattern of Matthew 18:15-17. Should the teacher have unresolved issues with the employer after utilizing the Matthew 18 principle, I and the employer agree to be bound by the following mediation and biding arbitration agreement in an attempt to resolve issues and bring reconciliation.

The employee contract then went on to include the ACSI-recommended Mediation and Binding Arbitration Agreement.

The school asked the court to enforce the provision and stay the case while the parties pursued arbitration. The Federal Arbitration Act (FAA) states, "A written provision in any... contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction... shall be valid, irrevocable, and enforceable, save upon grounds as exist at law or in equity for the revocation of any contract" (ellipses in court document).

Easterly argued that the arbitration provision in her employment contract was nonetheless unenforceable for these reasons:

  1. Its terms were "vague and ambiguous."
  2. The process required her to "forego vindication of her substantive rights guaranteed by the ADEA and ADA and Indiana contract law, and instead rely on biblical scripture to define her rights."
  3. The processes were "structurally biased and procedurally inadequate."
  4. It impeded her rights under ADEA and ADA, since the agreement required her to pay half of the fees and costs of arbitration.

In her first argument, Easterly stated that the contract provides that the Rules of Procedure for Christian Conciliation (RPCC) were supposed to govern the arbitration process, but those rules were not attached to the contract nor were details about the rules provided in her contract. Therefore she could not have fully understood the terms of the rules that removed her right to go to court. However, the court did not agree in the RPCC were readily available on the Internet, and Easterly could have obtained them with minimal effort had she desired to do so. It stated that "under the FAA the parties are free to agree to any governing rules, and the courts will enforce whatever system they chose" (citing Webster v. A.T. Kearny, Inc.).

Next Easterly pointed to the fact that the RPCC provided that "conciliators shall take into consideration any state, federal, or local laws that the parties bring to their attention, but the Holy Scriptures (the Bible) shall be the supreme authority governing every aspect of the conciliation process." The court concluded that submission to arbitration under the RPCC in no way would have deprived her of her right to vindicate her statutory rights.

In her next argument, Easterly charged that the processes of the agreement were biased and procedurally inadequate. Again the court disagreed, stating that the plaintiff failed to articulate how this was so. "The Supreme Court has repeatedly counseled that the FAA leaves no room for judicial hostility to arbitration proceedings and that courts should not presume, absent concrete proof to the contrary, that arbitration systems will be unfair or biased" (citing Penn v. Ryan's Family Steak Houses, Inc.).

In her last argument, Easterly argued the cost factor of the agreement. The court recognized that "'the existence of large arbitration costs could preclude a litigant... from effectively vindicating her federal statutory rights in the arbital forum.' However to invalidate an arbitration agreement based upon the risk that a party 'will be saddled with prohibitive costs... would undermine the liberal federal policy favoring arbitration agreements'" (citing Green Tree Financial Corp. v. Randolf, ellipses in court document). The court determined that it would not speculate about the ultimate cost of arbitration.

The court concluded its ruling in favor of the school by stating that "the FAA 'is a congressional declaration of a liberal federal policy favoring arbitration agreements' and 'that questions of arbitrability must be addressed with a healthy regard for the federal policy favoring arbitration'" (citing Duthie v. Matria Healthcare, Inc.).

Bottom line: Today's lawsuits are very costly for schools. Therefore it is prudent that Christian schools use a mediation and arbitration agreement in their faculty and staff contracts in order to avoid the expense of litigation through the courts. ACSI has recommended an employment agreement regarding mediation and binding arbitration.

Go to www.acsi.org/leg-resources for the newest agreement to use in contracts.

Easterly v. Heritage Christian Schools, 2009 WL 2750099 (S.D. Ind. Aug. 26, 2009)

http://ia311033.us.archive.org/0/items/gov.uscourts.insd.21661/gov.uscourts.insd.21661.23.0.pdf

LLU 20.3

Notice: This article is designed to provide accurate and authoritative information in regard to the subject matter covered. It has been provided to member schools with the understanding that ACSI is not engaged in rendering legal, accounting, tax, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought. Laws vary by jurisdiction, and the specific application of laws to particular facts requires the advice of an attorney.

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