In September 2014, the United States Sixth Circuit Court of Appeals reversed an order issued by a Michigan district court to compel arbitration. Robert Kay v. The Minacs Group, Inc., 13-1974 (6th Cir. Sep. 5, 2014). The case turned on the employer’s failure to include its entire employee handbook in the record.
In 1995, Plaintiff Robert Kay began working at Phoenix Group (Phoenix). Six years later, in 2001, The Minacs Group (Minacs) purchased Phoenix. Despite the change in ownership, Kay continued working for the company. In 2011, Minacs fired Kay and hired someone younger to replace him. Kay was sixty years old and he sued Minacs Group under the Age Discrimination in Employment Act (ADEA) and Michigan’s Elliot Larsen Civil Rights Act (ELCRA).
Minacs moved to dismiss Kay’s complaint and compel arbitration in accordance with a receipt of policies and procedures (Phoenix Receipt) that Kay had signed in 1995 when he was hired by Phoenix. The Phoenix Receipt contained an arbitration clause that read:
I also acknowledge that any and all controversies or claims arising out of, or relating to these Policies and Procedures shall be resolved by . . . arbitration . . .
In his complaint, Kay had stated that he began working for “defendant” in 1995. The district court took this statement as a judicial admission that Phoenix and Minacs were one and the same company and it therefore regarded the arbitration clause in the Phoenix Receipt as still being in effect. On that basis, the district court compelled Kay to arbitrate his age discrimination claims against Minacs.
Kay moved for reconsideration. He said that he never intended to admit that Phoenix and Minacs were the same entity. He said that he had been fired by Phoenix and rehired by Minacs and asked for leave to amend his complaint to clarify these points. He also said that the arbitration clause in the Phoenix Receipt did not cover his age discrimination claims, because Phoenix’s Policies and Procedures (Phoenix Policies) had been superseded by Minac’s own policies. Minacs opposed Kay’s motion, but it did not submit the Phoenix Policies or its own employee handbook to the court. The district court denied Kay’s motion for reconsideration and Kay appealed.
The Sixth Circuit reversed. It held that the district court had been too strict in construing Kay’s complaint and should have given him the chance to amend his complaint. The Sixth Circuit also held that Minac’s “troubling” failure to include the Phoenix Policies in the record defeated Minac’s position. The court noted that the arbitration clause covered those claims arising out of or relating to the Phoenix Policies but since the Phoenix Policies were not in the record, the court had no idea what the arbitration agreement covered. The court then interpreted the Phoenix Receipt literally and, because it did not say that it covered any age discrimination claims, the court ruled that Kay was not required to arbitrate his age discrimination claims and could pursue those claims in federal court. (The court was also critical of Minac’s failure to include its own handbook in the record, because it suspected that handbook superseded the Phoenix Policies.)
Practice Pointers: The Kay case illustrates that arbitration agreements should be construed like any other contract. That is, “[a]rbitration provisions, like any other provision, must be interpreted in the context of the whole contract.” Id. at 5. Thus, when the obligation to arbitrate a dispute is contested, it is prudent to put the parties’ entire agreement into the record, and it may be necessary to do so when the arbitration agreement does not fully and explicitly identify the kinds of disputes that it covers.
Keywords: alternative dispute resolution, litigation, Phoenix Group, Minacs Group, Robert Kay, arbitration, age discrimination, adr, ADEA, ELCRA