Texas Supreme Court sends more ex-Dillards Employees to Arbitration

As avid readers of this blog will note, a few weeks back we commented on an opinion from the Texas Supreme Court compelling arbitration in a defamation case against Dillards by a former employee. We speculated (and continue to speculate) that the Court may have indicated that an arbitration agreement which allowed for unilateral modification could be considered illusory, based on the following language:

The arbitration agreement and the 2000 rules do not provide Dillard any right to unilaterally modify the agreement. For that reason, and because both parties agreed to and signed the agreement, the agreement is not illusory and is binding on Martinez.

This past Friday, the Texas Supreme Court issued another opinion stemming from the same arbitration policy promulgated by the El Paso Dillards department store. This new Dillard opinion sidesteps the question of whether or not an arbitration agreement unilaterally modifiable by an employer is enforceable against an employee.

In this second Dillard opinion, the fired employee argued that since Dillard replaced its 2000 arbitration policy with a new one in 2002 and did not inform her, it retained the ability to unilaterally modify the 2000 arbitration agreement, and so the 2000 agreement was illusory. The Court makes short shrift of this argument. According to the Supreme Court, since an employer cannot bind an employee to a policy without notifying the employee, and since Dillards never notified its employee of the 2002 arbitration policy, it did not in fact unilaterally modify the 2000 agreement, which continued to bind the employee notwithstanding the fact that it had been replaced by a subsequent policy. In other words, since Dillards did not properly unilaterally modify its arbitration agreement, the Court did not have to reach the question of whether a unilaterally modifiable arbitration agreement is illusory and unenforceable.

The opinion also further strengthens a Texas at-will employer’s ability to bind its employees to arbitration policies. In this case, the fired employee testified that she attended a meeting where an arbitration agreement was presented by Dillards, but that she refused to sign to the agreement because she refused to be bound by its terms. The Court simply notes that the evidence indicates that Garcia was notified of the arbitration policy (notwithstanding the lower court’s finding to the contrary), so she was bound by it by continuing to work for Dillards after the meeting. In other words, Dillards was under no obligation to have its employees sign the agreement so long as it told them its policy was “agree to arbitration or lose your job.” The fact that an individual employee says “I refuse to arbitrate” has absolutely no impact on this analysis, according to the Supreme Court.

In re Dillard Department Stores, Cause No. 04-1132

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