S.D. Texas Holds Arbitral Agreement Enforceable in Employment Dispute

The Southern District of Texas has compelled a dispute between an oil worker and his former employer to arbitration.  In Gonzales et al. v. Brand Energy & Infrastructure Services, Inc., No. H-12-1718 (S.D. Tex. March 20, 2013), Daniel Gonzales was employed as an oil refinery worker at Brand Energy & Infrastructure Services, Inc. (“Brand”).  Upon commencement of his employment, Gonzales signed an acknowledgement that he received a copy of the “Brand Dispute Resolution Program for Employees” (“DRP”).  The document contained a clause which stated final resolution of any employment disputes would be determined through binding arbitration.

During the course of his employment, Gonzales and his fellow employees allegedly worked a number of overtime hours without receiving appropriate compensation.  After Gonzales filed a lawsuit in federal court based on alleged violations of the Fair Labor Standards Act, quantum meruit, and unjust enrichment, he sought to proceed with a collective and class action.  Brand responded by filing a motion to dismiss the lawsuit and compel the dispute to arbitration.  Brand also asked the court to deny Gonzales’ collective and class action requests.  Gonzales then responded that the agreement to arbitrate was illusory and unenforceable and stated his collective or class status was a question for the arbitrator.

First, the Southern District of Texas examined “whether the parties entered into a binding agreement to arbitrate the dispute.”  Because Gonzales did not challenge the scope of the arbitral agreement, the court only considered its validity.  Gonzales argued that the agreement was illusory because Brand had the ability to unilaterally terminate or amend the DRP with ten days notice in order to avoid arbitration.  According to the court, however, the arbitration clause at issue was comparable to the one upheld by the Texas Supreme Court in In re Halliburton Co., 80 S.W.3d 566 (Tex. 2002):

The relevant provisions in this case are strikingly similar to those in Halliburton. The court concludes that the arbitration agreement between Gonzales and Brand is not illusory because both the “amendment clause” and the “termination clause” are “Halliburton type savings clauses” that prevent Brand from retroactively modifying or eliminating its arbitration policy. Under the terms of the DRP, if a dispute arises between Brand and an employee, the dispute would be governed by the DRP as it then existed — not by any subsequently modified DRP.

Because of this, the Southern District of Texas stated the agreement to arbitrate was valid ordered the dispute to binding arbitration.

Next, the court examined Gonzales’ request for class or collective arbitration.  The court stated,

The Supreme Court has not definitively decided the class arbitration issue. The court has stated, however, that “procedural questions which grow out of the dispute and bear on its final disposition are presumptively not for the judge, but for an arbitrator, to decide.”

The Southern District of Texas continued by stating, “The Fifth Circuit addressed this issue more recently, arriving at the same result through different means.”  Next, the court held, “under the relevant precedent the question whether Gonzales may arbitrate on a collective or class action basis is for the arbitrator to decide.”

Because the parties entered into a valid agreement to arbitrate, the Southern District of Texas granted Brand’s motion to dismiss the case and compelled the employment dispute to arbitration.