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Arbitration Update

In Thomas v. Hyundai of Bedford, No. 108212 (January 23, 2020), the Eighth District Ohio Court of Appeals found an arbitration agreement in an employment contract to be unenforceable because it was overly broad, and in large part,included disputes which fell outside the scope of the employment relationship.

Thomas worked for Migdal I, LLC and Hyundai of Bedford (collectively “Hyundai”). On December 15, 2017, Thomas signed an arbitration agreement with Hyundai which provided that Thomas or Hyundai may demand arbitration under the Federal Arbitration Act to resolve “Covered Disputes” defined as: “any actual or alleged claim or liability, regardless of its nature, that [Hyundai] or its owners, managers, members, officers, employees, agent, or insurers may wish to bring against Employee, or that Employee may wish to bring against [Hyundai]or any of [Hyundai’s] owners, managers, members, officers, employees, agents, or insures.” (Emphasis added.)   The arbitration agreement excluded claims for unemployment and workers’ compensation and violations of the National Labor Relations Act.

In September 2018, Thomas filed a two-count complaint against Hyundai alleging both race discrimination and retaliation under Ohio’s anti-discrimination statute, Ohio Revised Code Chapter 4112. In response to Thomas’ complaint, Hyundai filed a motion to stay the proceedings pending arbitration, which the court granted. Thomas appealed the trial court’s decision.

The Eighth District Ohio Court of Appeals reversed and remanded the case back to the trial court, finding the arbitration agreement was both substantively and procedurally unconscionable. A contract is “substantive unconscionable” when the contractual terms are unfair or unreasonable, which means the agreement is essentially one-sided. “Procedural unconscionability” means one party lacks a meaningful choice to enter the agreement. For an arbitration agreement to be unenforceable, it must be both substantively and procedurally unconscionable. In Thomas, the court found the arbitration agreement, drafted by Hyundai, to be unenforceable because it included arbitration of any claims against any affiliates of Hyundai.

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