Floss v. Ryan’s Family Steak House, Inc.

Facts

This was a consolidation of two different claims against D with differing results in the lower courts. Both Ps signed a 'Job Applicant Agreement to Arbitration of Employment-Related Disputes.' D includes this agreement in its employment application packet. Only those applicants who sign the agreement are considered for employment at D. Both Ps acknowledge signing the agreement. The agreement to arbitrate is not with D but runs between the employee and a third-party arbitration services provider, Employment Dispute Services, Inc. ('EDSI'). EDSI agreed to provide an arbitration forum in exchange for the employee's agreement to submit any dispute with his potential employer to arbitration with EDSI. D is not explicitly identified as a party to the agreement, but the agreement says the employee's potential employer is a third-party beneficiary of the employee's agreement to waive a judicial forum and arbitrate all employment-related disputes. The agreement gives EDSI complete discretion over arbitration rules and procedures. The agreement says that all arbitration proceedings will be conducted under 'EDSI Rules and Procedures.' The agreement then gives EDSI the unlimited right to modify the rules without the employee's consent. Both Ps signed the agreement and began their employment at D shortly thereafter. Daniels ceased working at D on August 13, 1997. On that date, Daniels claims he attempted to resume his employment with D after taking a medical leave to treat his viral hepatitis. Daniels says D terminated him upon his return to the restaurant. Floss ceased working at D on January 23, 1998. Floss left her position with D after a confrontation with two management employees. According to Floss, these management employees intimidated and harassed her after learning that she had complained to the United States Department of Labor regarding D pay practices. Floss sued D in the United States District Court for the Eastern District of Kentucky for violation of the Fair Labor Standards Act Floss claimed that Ryan's did not pay employees legally-required minimum and overtime wages, failed to pay employees for certain hours worked, and retaliated against her because she complained of these practices to the United States Department of Labor. Floss sued in both her individual capacity and on behalf of similarly-situated D employees. Daniels filed his action against D in the United States District Court for the Eastern District of Tennessee. In this action, Daniels asserted a claim under the ADA, alleging that D terminated him on account of his handicapped status despite his ability to perform the essential functions of his job with or without reasonable accommodation. D filed motions to compel arbitration. In ruling on these motions, the respective district courts reached different conclusions as to whether the agreements were enforceable. In Daniels's action, the district court ruled that the agreement was not enforceable. EDSI did not provide Daniels with any consideration for his promise to arbitrate his dispute with D. Though EDSI promised to provide an arbitration forum, the court found that only D and EDSI, rather than Daniels, actually benefited from that promise. The court also found that the arbitration document did not bind EDSI. Specifically, the court noted that the agreement gave EDSI an unlimited right to unilaterally modify or amend the rules and procedures of the arbitration proceeding without providing notice to Daniels. Finally, the court noted that even if enforceable, the agreement was not sufficiently clear so as to represent a knowing and intelligent waiver of Daniels's right to pursue his disability discrimination claim in federal court. The district court in Floss's case enforced the agreement. The court rejected Floss's argument that claims under the FLSA could not be made subject to mandatory arbitration.

Issues

Rule of Law

Holding and Decision

Legal Analysis

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