El Paso COA Holds Arbitration Agreement Was Not Illusory in Workplace Accident Case

The Court of Appeals of Texas in El Paso has ordered a workplace personal injury case to arbitration.  In ReadyOne Industries, Inc. v. Carreon, No. 08–13–00150–CV (Tex. App – El Paso, December 10, 2014), a man, Carreon, filed a lawsuit against his employer, ReadyOne, after he was allegedly hurt in a 2011 workplace accident.  According to Carreon, he suffered a significant injury to his arm and shoulder as a result of his employer’s failure to provide him with a safe environment in which to work.  ReadyOne responded to Carreon’s complaint by filing a motion to compel arbitration pursuant to a Mutual Agreement to Arbitrate (“MAA”) adopted by the company in 2007 and an acknowledgement regarding the arbitration policy that was signed by Carreon when he began working for the company in 2010.

In his opposition to ReadyOne’s motion, Carreon argued that the MAA was illusory because ReadyOne had the power to modify or terminate it at any time.  According to Carreon, an Employee Injury Benefit Plan/Summary Plan Description (“SPD”) he signed when his employment commenced incorporated the MAA by reference.  Because of this, the employee claimed that the termination provisions included in the SPD controlled and provided his employer with the ability to terminate the MAA at any time.  After reviewing the documents at issue, the trial court held that the MAA was illusory and denied ReadyOne’s motion to compel arbitration. ReadyOne then filed an interlocutory appeal with the El Paso Court of Appeals.

On appeal, ReadyOne asserted that the trial court committed error when it ruled that the MAA was illusory.  First, the court stated, “An arbitration agreement is illusory if one party can avoid its promise to arbitrate by unilaterally amending the provision or terminating it altogether.”  Next, the appellate court examined the language of the MAA and held that the agreement itself was not illusory “because it does not permit ReadyOne to unilaterally or retrospectively terminate the agreement and it requires ReadyOne to provide ten days’ notice to prospectively terminate.”

The court then turned to Carreon’s claim “that the MAA is not a stand-alone arbitration agreement, but rather is incorporated by reference in the SPD/Employee Injury Benefit Plan.”   The Court of Appeals stated,

The receipt portion of this document merely requires Carreon to acknowledge that he has received and read, or had an opportunity to read, various documents, including the MAA and SPD. The arbitration portion of the document requires Carreon to acknowledge that one of the documents he received is a mandatory company policy which requires both he and ReadyOne to arbitrate certain claims. The receipt and arbitration acknowledgement document does not incorporate the MAA or the SPD by reference. See In re ReadyOne, 400 S.W.3d at 169–73; Sun Fab Industrial Contracting, Inc. v. Lujan, 361 S.W.3d 147, 152–53 (Tex.App.—El Paso 2011, no pet.).

In addition, the El Paso Court dismissed Carreon’s claim that the program highlights provision in the SPD incorporated the MAA by reference.  The relevant provision stated:

What if I am still not satisfied with how my injury is handled?

In addition to a formal benefit appeals process, there is an Arbitration Policy attached to the back of this booklet. The Arbitration Policy will help resolve any other injury-related disputes between you and the Company quickly and fairly. Arbitration is a process in which a skilled, independent arbitrator (similar to a judge) hears both sides of the situation and then makes a final and binding decision. Decisions by the arbitrator generally must be made according to the same principles of law that control decisions by courts. Arbitrators can award the same damages or remedies as a court of law. [Emphasis in original].

According to the court, the language of this provision did not incorporate the MAA by reference.  Because the trial court committed error when it decided the MAA was illusory, Texas’ Eighth District Court of Appeals in El Paso reversed the lower court’s decision and remanded the case with instructions to grant ReadyOne’s motion to compel arbitration.

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