Court to employers: Don’t wait too long to arbitrate employments claims

A recent federal appellate court decision is an important reminder to confirm early—not later—whether the employee suing your business signed an arbitration agreement.

The plaintiff had signed an agreement with an arbitration provision that covered his subsequent claims for disability discrimination, which he filed in federal court. But the employer didn’t act on it right away.

To say the employer delayed would be an understatement. Over the next six-and-a-half months, the parties engaged in extensive discovery. Among other things, the employer participated in a discovery conference, served written discovery, filed a joint discovery plan, produced tens of thousands of pages of documents in response to the plaintiff’s discovery, issued fourteen third-party subpoenas, took the plaintiff’s deposition, produced witnesses for deposition, took third-party depositions, and agreed to an extension of the discovery deadline.

Then, seemingly, it figured out that the plaintiff had signed an agreement to arbitrate and moved to compel arbitration.

Even after filing the motion, the defendant produced three more witnesses for deposition, served two more third-party subpoenas, and produced documents in response to the plaintiff’s discovery requests. The plaintiff then moved for summary judgment.

The issue here was whether the defendant had waived its right to arbitrate the plaintiff’s employment claims by waiting so long to try to arbitrate them. In 2022, the Supreme Court eliminated any notion that the defendant’s delay prejudiced the plaintiff. Instead, ordinary waiver rules apply.

The defendant argued that the court should discount its affirmative discovery because “arbitration also includes discovery.” But, the Sixth Circuit focused instead on the amount of discovery that the defendant had already taken in federal court, invoking the power of that court under the Federal Rules of Civil Procedure.

Beyond the extensive discovery in which the defendant had engaged, the court noted that the defendant had failed to raise the arbitration agreement as an affirmative defense (although it did assert others).

There was no evidence that the defendant delayed seeking to arbitrate the plaintiff’s claims to gain some tactical advantage. Indeed, the defendant argued that its failure to move to compel arbitration earlier was a mistake because counsel was unaware of the arbitration clause. But the defendant had to concede that it had “imputed knowledge” of the employment agreement, and despite counsel’s failure to read it, the mistake did not prevent the court from finding waiver.

So, if an employee sues your business, determine early on whether they agreed to arbitrate those claims and, if so, seek immediate relief from the court.