New England Biz Law Update
A Massachusetts Superior Court judge has ruled that an employer could not enforce a mandatory arbitration agreement after spending months in litigation activity.
The case involved a former nonprofit leader who sued after allegedly being terminated following a hospitalization related to mental health concerns. She brought claims involving retaliation under the state Paid Family and Medical Leave Act (PFMLA), disability discrimination, and state wage and sick leave laws.
Although the employee had signed an arbitration agreement months after being hired, the employer did not immediately invoke it.
Instead, over roughly five months, the employer participated in discovery, attended multiple conferences with opposing counsel, negotiated confidentiality agreements, and filed counterclaims against the employee.
Arbitration was not raised until after the employee moved to add additional disability discrimination claims to the lawsuit. At that point the employer attempted to move the case into arbitration, and the court refused.
Why the court sided with the employee
The court applied a five-factor test used to determine whether a party has waived arbitration rights through litigation conduct.
While not every factor favored the employee, the judge concluded the overall circumstances showed the employer acted inconsistently with a claimed right to arbitrate.
The judge pointed to several factors:
- The employer actively participated in litigation activities, including conferences and discovery responses.
- The employer invoked the court process by filing counterclaims that themselves would have been subject to arbitration.
- Arbitration was not raised until months into the case, though the court noted the timing issue alone was less persuasive because the case was still in relatively early stages.
Employer reminders
The decision does not change the enforceability of arbitration agreements generally, but it highlights the importance of raising arbitration issues early and consistently.
Employers using arbitration agreements may want to ensure that their agreements are easy to locate, review arbitration obligations promptly when claims arise, and carefully consider whether litigation actions (such as filing counterclaims or engaging extensively in discovery) could later be viewed as inconsistent with a right to arbitrate.
Employers may also want to evaluate early whether to litigate or seek arbitration, particularly when multiple claims or agencies are involved.
