REMBERT v. RYAN'S FAMILY STEAK HOUSES, INC
Case Details
- Citation
- 235 Mich. App. 118
- Judge(s)
- Before: Gage, P.J., and Kelly, Hood, McDonald, Cavanagh, Saad, and O’Connell, JJ.; Gage, P.J., and Kelly and O’Connell, JJ., concurred.; Hood and McDonald, JJ., concurred.
- Procedural Posture — the stage the case had reached
- appeal
- State
- Michigan
Related Laws
No specific laws identified for this ruling.
Claim Types
Outcome
Michigan Court of Appeals held that predispute agreements to arbitrate statutory employment discrimination claims are valid and enforceable if they do not waive substantive rights, provide procedurally fair methods for resolution, and give clear notice to employees. Case remanded to trial court for findings of fact on whether the arbitration agreement met these requirements.
Excerpt
REMBERT v RYAN’S FAMILY STEAK HOUSES, INC Docket No. 196542. Submitted June 1, 1998, at Lansing. Decided April 9, 1999, at 9:15 A.M. Leave to appeal sought. John Rembert brought an action in the Genesee Circuit Court against Ryan’s Family Steak Houses, Inc., his employer, and another, seeking damages for race discrimination under the Civil Rights Act, MCL 37.2101 et seq.; MSA 3.548(101) et seq., and handicap discrimination under what is now known as the Persons With Disabilities Civil Rights Act, MCL 37.1101 et seq.; MSA 3.550(101) et seq. The plaintiff thereafter resigned from his employment and amended his complaint to include claims of constructive discharge and intentional infliction of emotional distress. The court, Geoffrey L. Neithercut, X, after finding that the plaintiff had failed to establish that he was incompetent to understand the arbitration agreement that he had signed at the time of his employment, granted summary disposition for the defendants on the basis that the claims raised by the plaintiff were subject to, and thus barred by, the arbitration agreement. The plaintiff appealed. The Court of Appeals, Corrigan, C.J., and Griffin and Hoekstra, JX, in an opinion released December 2, 1997, affirmed the trial court’s order with respect to the claims of constructive discharge and intentional infliction of emotional distress, but reversed the trial court’s order with respect to the two statute-based discrimination claims on the basis of the holding of the majority in Rushton v Meijer, Inc (On Remand), 225 Mich App 156 (1997), which was binding precedent pursuant to MCR 7.215(H). The panel further indicated that in the absence of the requirement that it follow the holding of the majority in Rush-ton, it would have affirmed the order of the trial court for the reasons set forth in Judge (now Justice) Taylor’s opinion in Rushton. 226 Mich App 822 (1997). By its order of December 16, 1997, the Court of Appeals vacated the December 2 opinion and convened a special panel pursuant to MCR 7.215(H) to resolve the conflict between the position taken by the panel in this case and the position taken by the majority in Rushton. 226 Mich App 821 (1997). After consideration by the conflict resolution panel, the Court of Appeals held-. 1. The Michigan Legislature, by enacting the Michigan arbitration act, MCL 600.5001 et seq.; MSA 27A.5001 et seq., has expressed a strong public policy favoring private voluntary arbitration, and Michigan courts have historically enforced agreements to arbitrate disputes. Michigan law has upheld predispute agreements to arbitrate statutory claims where the agreements have not diminished the effect of the statute. 2. Because of this state’s strong public policy favoring arbitration, predispute agreements to arbitrate statutory employment discrimination claims are valid if there is a valid binding contract to arbitrate the statutory claims, the statute itself does not prohibit an agreement to arbitrate claims under the statute, the arbitration agreement does not waive the substantive rights and remedies set forth in the statute, and the arbitration procedures are fair so that an employee may effectively assert the statutory rights. 3. If an agreement to arbitrate a statutory employment discrimination claim does not waive any statutory rights and provides a procedurally fair method of resolving such claims, it is reasonable as a matter of law and is not an unenforceable contract of adhesion. Accordingly, on remand the trial court must make findings of fact concerning whether the agreement in this matter waives any statutory rights and provides a procedurally fair method of resolving the statutory claims. 4. Neither the Civil Rights Act nor the Persons With Disabilities Civil Rights Act contains a provision that precludes an employer and employee from entering into a predispute agreement to arbitrate employment discrimination claims that may arise under those acts. Further, because the Michigan arbitration act gives broad approval to arbitration agreements and expressly excludes collective labor contracts and certain real estate disputes from its provisions while containing no similar exclusion with respect to statutory employment discrimination claims, the act implicitly includes agreements to arbitrate employment discrimination claims within the scope of its provisions. 5. In order to ensure that an employee has a fair opportunity to vindicate effectively any statutorily protected rights, a predispute agreement to arbitrate employment discrimination claims must give clear notice to the employee that the right to adjudicate discrimination claims in a judicial forum is being waived and that such claims will be arbitrated, must inform the employee of the right to representation by counsel, must provide that the arbitration proceedings will be before a neutral arbitrator, must provide for reasonable discovery, and must provide for a fair arbitral hearing. Fairness does not require that the employer must pay the fees of an arbitrator or an arbitration service. 6. Judicial review of an arbitral award is pursuant to the provisions of MCR 3.602(J)(1), which provides for the vacation of an award where, among other things, the arbitrator has exceeded the powers granted to the arbitrator. The powers granted to the arbitrator are exceeded where the arbitrator makes an error of law that is so material or so substantial as to have governed the award and but for which the award would have been substantially otherwise. To allow for sufficient review, arbitral awards must be in writing and contain findings of fact and conclusions of law. Remanded. Cavanagh, J., dissenting, stated that the decision of the trial court that direct judicial construction of the statutory claims was precluded by the predispute arbitration agreement should be reversed because Michigan’s longstanding public policy entitling persons seeking to protect their civil rights to direct review of their claims by the courts cannot be abrogated by contract. 1. Arbitration — Employment Discrimination — Employment Contracts — Agreement to Arbitrate. Predispute agreements to arbitrate statutory employment discrimination claims are valid if there is a valid binding contract to arbitrate the statutory claims, the statute itself does not prohibit an agreement to arbitrate claims under the statute, the arbitration agreement does not waive the substantive rights and remedies set forth in the statute, and the arbitration procedures are fair so that an employee may effectively assert the statutory rights. 2. Arbitration — Civil Rights Act — Persons With Disabilities Civil Rights Act — Employment Contracts — Agreement to Arbitrate — Public Policy. An agreement in an employment contract requiring any subsequent dispute involving a claim under the Civil Rights Act or the Persons With Disabilities Civil Rights Act to be submitted to binding arbitration is not contrary to any express provision of either act and is not contrary to the public policy of the state of Michigan (MCL 37.1101 et seq., 37.2101 et seq.; MSA 3.550[101] et seq., 3.548[101] et seq.). 3. Arbitration — Employment Discrimination — Employment Contracts — Agreement to Arbitrate — Contracts of Adhesion. An agreement to arbitrate a statutory employment discrimination claim that does not waive any statutory rights and provides a procedurally fair method of resolving such a claim is reasonable as a matter of law and is not an unenforceable contract of adhesion. 4. Arbitration — Employment Contracts — Employment Discrimination — Agreement to Arbitrate. An agreement in an employment contract to arbitrate any subsequent employment discrimination claims that may arise must give clear notice to the employee that the right to adjudicate discrimination claims in a judicial forum is being waived and that such claims will be arbitrated, must inform the employee of the right to representation by counsel, must provide that the arbitration proceedings will be before a neutral arbitrator, must provide for reasonable discovery, and must provide for a fair arbitral hearing; fairness does not require that the employer must pay the fees of an arbitrator or an arbitration service. Stark and Gordon (by Sheldon J. Stark and Carol A. Laughbawn) and (Kenneth Ivan Brown, of Counsel), for the plaintiff. Bodman, Longley & Dahling LLP (by Diane L. Akers, and Paul R. Bernard), for the defendants. Amici Curiae: Jeffrey S. Reuble and Miller, Canfield, Paddock and Stone, PL.C. (by Charles S. Mishkind), for Meijer, Inc. Jackson, Lewis, Schnitzler & Krupman (by Stephen X. Munger and by J. Steve Warren and Stephen F. Fisher), for Employment Dispute Services, Inc. Clark Hill PL.C. (by Duane L. Tamacki and J. Walker Henry), for Michigan Manufacturers Association. Dykema Gosssett PLLC (by Laurence D. Connor and Rosemary G. Schikora) and Richard L. Hurford, for Masco Corporation, Masco Tech, and TriMas. Patrick L. Rose, Thomas Donnellan, Sheldon J. Stark, and Michael J. Steinberg, for American Civil Liberties Union Fund of Michigan. Amberg, McNenly, Zuschlag, Firestone and Lee, PC. (by Joseph H. Firestone), for Michigan Education Association. Sachs, Waldman, O’Hare, Helveston, Bogas & McIntosh, PC. (by John R. Runyan, Jr., Mary Katherine Norton, and Elizabeth A. Cabot), for Michigan State AFL-CIO, International Union UAW, and Wolverine Bar Association. Kelman, Loria, Simpson, Will, Harvey & Thompson (by Janet M. Tooley), for Michigan Trial Lawyers Association. Frank J. Kelley, Attorney General, Thomas L. Casey, Solicitor General, and Robert L. Willis, Jr., Assistant Attorney General, for Michigan Department of Civil Rights. Before: Gage, P.J., and Kelly, Hood, McDonald, Cavanagh, Saad, and O’Connell, JJ. Saad, J. I. NATURE OF THE CASE This conflicts panel was convened to decide if a predispute agreement to arbitrate statutory employment discrimination claims arising under the Michigan Civil Rights Act (cra) and the Persons With Disabilities Civil Rights Act (pwdcra) is valid and enforceable. In Rushton v Meijer, Inc (On Remand), 225 Mich App 156; 570 NW2d 271 (1997), this Court held that this kind of predispute agreement is invalid as a matter of public policy. Contrary to Rushton’s holding, the overwhelming majority of federal and other state courts have held that these agreements are enforceable, provided that the arbitration procedures are fair and the agreement waives no substantive rights and remedies. We join the majority of courts and hold that as long as no rights or remedies accorded by the statute are waived, and as long as the procedure is fair, employers may contract with their employees to arbitrate statutory civil rights claims. Our holding breaks no new ground, but rather is consistent with our state’s public policy, and federal public policy, both of which increasingly and overwhelmingly favor arbitration as an inexpensive and expeditious alternative to litigation. Specifically, our holding furthers the objectives of the Michigan arbitration act (maa), which is a strong and unequivocal legislative expression of Michigan’s proarbitration public policy. In accordance with the maa’s endorsement of arbitration, and the cra’s and the pwdcra’s silence regarding the matter, we will not interfere with private parties’ contractual undertakings to arbitrate these claims. Our opinion is also consistent with the traditional principles of freedom of contract in the employment context. Clearly, employers are free to condition employment on employer-drafted wage and benefit structures and work rules as long as they comply with applicable statutory and common-law mandates. Similarly, we hold that employers are also free to require arbitration of claims as a condition of employment, provided that the agreement complies with our holding here. While our decision upholds the principle of freedom of contract and advances the public policy that strongly favors arbitration, it does so subject to two conditions generally accepted in the common law: that the agreement waives no substantive rights, and that the agreement affords fair procedures. These conditions are rooted in two critically important bases: (1) our Supreme Court’s decision in Renny v Port Huron Hosp, 427 Mich 415; 398 NW2d 327 (1986), which held that agreements to arbitrate employment claims must have fair procedures, and (2) Michigan and federal decisions (which generally have been held to be persuasive authority in Michigan employment discrimination cases) that uniformly hold that these arbitration agreements may not waive any substantive rights or remedies provided by the statute and must provide for fair procedures. With regard to procedural fairness, we will also detail below the specific procedural safeguards that we believe are mandated by Penny's requirement of fair procedures. Additionally, as we discuss below, contracts providing for compulsory arbitration of discrimination claims must, of course, meet the general rules regarding the validity of contracts. Although other contractual issues raised in this case are beyond the scope of this conflicts panel, we do hold, as a matter of law, that an arbitration agreement that does not diminish the rights and remedies guaranteed by the relevant employment discrimination statute and that is fair procedurally is not an unenforceable contract of adhesion. After discussing the facts, we will analyze the issues in the following sequence. We begin by discussing the prevailing public policy favoring arbitration that is evidenced in both Michigan and federal law. We then address how this proarbitration policy developed to include claims arising under public interest statutes and trace that development to judicial approval of predispute agreements to arbitrate statutory civil rights claims. Thereafter, we examine the necessary conditions for enforcement of these agreements: (1) a valid arbitration contract, (2) the absence of statutory prohibition against arbitrating particular statutory claims, and (3) the requirements of procedural fairness. Finally, we set forth the specific requirements for procedural fairness and define the standard of review. II. FACTS AND PROCEEDINGS Defendant Ryan’s Family Steak Houses, Inc., hired plaintiff as a bread maker in October 1993. At the time he was hired, plaintiff signed an arbitration agreement with Employment Dispute Services, Inc. (eds). The arbitration agreement provided, in pertinent part: Your potential Employer (“signatory company” or “Company”) has entered into an agreement with Employment Dispute Services, Inc. (eds) to arbitrate and resolve any and all employment-related disputes between the Company’s employees (and job applicants) and the Company. The following Agreement between You and eds is a “selection of forum” agreement by which you agree that employment-related disputes between You and the Company shall be resolved through arbitration. Any arbitration matter shall be heard and decided under the provisions and the authority of the Federal Arbitration Act, 9 USC sec. 1, as applicable. The purpose of this agreement is to provide You and the Company a forum in which claims or disputes with the Company and any other signatories may be resolved by arbitration rather than litigation. This Agreement does not restrict you from filing a claim or charge with any state or federal agency, for example, Equal Employment Opportunity Commission, state unemployment agency, state workers’ compensation commission, where applicable. Rather, the Agreement applies only to State or Federal court proceedings. While an employee with Ryan’s Family Steak Houses, Inc., plaintiff sued defendants in the circuit court for race discrimination under the CRA and handicap discrimination under the pwdcra (then known as the Michigan Handicappers’ Civil Rights Act). Plaintiff alleged that he suffers from epilepsy and cognitive defects resulting from a head injury. Plaintiff made a variety of allegations relating to discrimination in the terms of his employment. Plaintiff subsequently resigned his employment and amended his complaint to include a charge of constructive discharge. Plaintiff also raised a common-law claim of intentional infliction of emotional distress. Defendants moved for summary disposition pursuant to MCR 2.116(C)(7) (agreement to arbitrate) based on the signed arbitration agreement. After ruling that plaintiff had failed to establish that he was incompetent to understand the agreement he had signed, the trial court granted defendants’ motion. Plaintiff appealed. Meanwhile, a majority of a panel of this Court decided in Rushton, supra, that agreements to arbitrate employment-related discrimination claims were unenforceable as a matter of public policy. A panel of this Court therefore reversed the trial court’s order in this case because it was obligated to follow Rushton under MCR 7.215(H)(1). Rembert v Ryan’s Family Steakhouse, Inc, 226 Mich App 821; 575 NW2d 287 (1997) (Rembert I). The Rembert I panel opined that it reversed the trial court’s order only because it was obligated to follow Rushton and that it would have held otherwise if free to do so. The Court thereby invoked the conflicts panel provision under MCR 7.215(H). Pursuant to MCR 7.215(H), Rembert I was vacated, 226 Mich App 821-822, and this special conflicts panel was convened to resolve the conflict. III. ANALYSIS A. MICHIGAN AND FEDERAL LAW ENDORSE ARBITRATION 1. MICHIGAN COMMON LAW AND STATUTORY LAW STRONGLY FAVOR ARBITRATION Our Legislature has expressed a strong public policy favoring private voluntary arbitration, and our courts have historically enforced agreements to arbitrate disputes. As early as the nineteenth century, our Supreme Court held: “A parol submission to arbitration is good at common law, and is not forbidden by any statute. ... If [the parties submitted their agreement to a common arbiter], it would be a valid award.” Cady v Walker, 62 Mich 157, 159; 28 NW 805 (1886). See also Hoste v Dalton, 137 Mich 522, 526; 100 NW 750 (1904) (rejecting various arguments against enforcement of arbitration), and Detroit v A W Kutsche & Co, 309 Mich 700, 703; 16 NW2d 128 (1944) (“The general policy of this State is favorable to arbitration. ... If parties desire arbitration, courts should encourage them.”). Judicial approval of arbitration has broadened and strengthened in recent decades. This Court stated in EE Tripp Excavating Contractor, Inc v Jackson Co, 60 Mich App 221, 246-247; 230 NW2d 556 (1975): The heavily case-loaded courts are no longer jealous of their jurisdiction. Where the parties, by a fair agreement, have adopted a speedy and inexpensive means by which to have their disagreements adjusted, we see no public policy reasons for the courts to stand in their way. On the contrary we have a clear expression of public policy in the legislative enactments which provide for statutory arbitration. [Emphasis supplied.] Judicial approbation of arbitration has grown and now applies to many fields. For example, in the important area of medical malpractice, our Court, in Cox v D'Addario, 225 Mich App 113, 129-130; 570 NW2d 284 (1997), upheld an arbitration agreement as valid under Michigan’s medical malpractice act because “the public policy of this state favors the enforcement of valid arbitration agreements.” Further, in Moss v Dep’t of Mental Health, 159 Mich App 257, 264; 406 NW2d 203 (1987), involving statutory and contract rights of mental health provider employees, our Court held that arbitration was not an “unconstitutional intrusion upon the powers of the judiciary,” but rather is a “well-established mechanism for dispute resolution which is highly favored by the courts.” In FJ Siller & Co v City of Hart, 400 Mich 578, 581-582; 255 NW2d 347 (1977), our Supreme Court declined to interpret an agreement to arbitrate a construction contract dispute as meaning that arbitration was merely a “condition precedent”
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