Delegation Clause Enforced

In Becker v. Delek US Energy [PDF], Nos. 20-6255/6258, (6th Cir. July 6, 2022), the plaintiff Becker was employed by Cypress Environmental Management pursuant to an employment agreement that provided he would be assigned to work at various locations performing services for, and under the supervision of, entities with whom Cypress contracted. The agreement contained an arbitration provision with a delegation clause that provided the arbitrator would “arbitrate arbitrability.”

Becker was assigned to work at a Delek location. He continued to be paid by Cypress. He sued Delek under the Fair Labor Standards Act, contending that Delek was his “real” employer, and made him work overtime without pay. Cypress intervened. Both Delek and Cypress moved to compel arbitration. The District Court denied the motion because, among other reasons, Delek was not a party to the employment agreement.

On appeal, the Sixth Circuit panel noted that Becker’s attack on the arbitration provision was “general” and not specifically directed to the delegation clause. Thus, the court reasoned, relying primarily on the holding in Rent-a-Center, all issues of arbitrability, including whether the provision may be enforced by a third party, must be decided by the arbitrator rather than the trial court. Accordingly, the trial court’s decision was reversed.

Robert Arrington is of counsel at Wilson Worley in Kingsport, Tennessee.

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