Employee Resource Group and Charles Rice v. Connie Harless
16-0493
| W. Va. | Apr 13, 2017Background
- Connie Harless was general manager at an ERG Wendy’s (employed 1984–2014) and alleged she reported co-worker sexual harassment and was later terminated.
- Harless sued ERG and Charles Rice under the West Virginia Human Rights Act alleging retaliatory/discriminatory reprisals (filed Feb. 2015).
- ERG moved to compel arbitration based on its "Dispute Resolution Program" (signed acknowledgement in 2005) requiring mediation/arbitration for covered employment claims and listing statutory discrimination and harassment claims as arbitrable.
- The Program included fees/costs provisions (party pays own attorneys’ fees; arbitrator may award fees where statutory law permits; arbitrator may assess fees for frivolous claims; filing-fee caps and employer assistance), a severability clause, and a delegation clause assigning arbitrability questions to the arbitrator (not raised below).
- The circuit court denied the motion, finding the arbitration agreement both procedurally and substantively unconscionable; petitioners appealed.
- The Supreme Court of Appeals reversed, holding Harless failed to meet her burden to show procedural or substantive unconscionability and remanded for arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability — Procedural unconscionability | Harless: agreement was adhesive, nonnegotiable, signature page inadequate, no meaningful opportunity to understand terms | ERG: acknowledgment and booklet put employee on notice; adhesive nature not dispositive; no evidence of coercion or unfair formation | Court: Procedural unconscionability not proven — adhesive form alone insufficient and no record of fraud, duress, or lack of opportunity to understand |
| Enforceability — Substantive unconscionability (fee/cost provisions) | Harless: fee-shifting, frivolous-claim penalties, and mediation requirement discourage pursuit of statutory claims | ERG: provisions are bilateral/discretionary; arbitrator may award fees when statute allows; employer assists with filing fees; parties mutually bound | Court: Provisions are not one-sided or overly harsh; fee terms are bilateral/discretionary and do not bar effective vindication of statutory rights |
| Scope — Are statutory discrimination/retaliation claims arbitrable? | Harless: statutory rights (WV Human Rights Act) should not be waived via form arbitration clause | ERG: Program explicitly lists discrimination, harassment, wrongful termination and retaliation as arbitrable | Court: Statutory claims fall within the agreement; Federal and West Virginia precedent permit arbitration of statutory employment claims |
| Delegation clause (who decides arbitrability) | Harless: challenged enforceability in court | ERG: delegation clause assigns arbitrability to arbitrator (not argued below) | Court: Petitioners waived delegation argument by not raising it below; court did not decide delegation issue |
Key Cases Cited
- Credit Acceptance Corp. v. Front, 231 W.Va. 518 (2013) (order denying motion to compel arbitration is immediately appealable under collateral order doctrine)
- Brown ex rel. Brown v. Genesis Healthcare Corp., 228 W.Va. 646 (2011) (unconscionability requires both procedural and substantive elements; burden on party attacking contract)
- Nationstar Mortg., LLC v. West, 237 W.Va. 84 (2016) (procedural unconscionability factors and adhesive-contract analysis)
- Dan Ryan Builders, Inc. v. Nelson, 230 W.Va. 281 (2012) (substantive unconscionability includes lack of mutuality; assess commercial reasonableness)
- State ex rel. City Holding Co. v. Kaufman, 216 W.Va. 594 (2004) (liberal construction of arbitration clauses; resolve doubts in favor of arbitration)
- State ex rel. Richmond Am. Homes of W.Va., Inc. v. Sanders, 228 W.Va. 125 (2011) (arbitrability and contract-formation governed by state law contract principles)
- New v. GameStop, Inc., 232 W.Va. 564 (2013) (party is presumed to have read and assented absent fraud or duress)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (procedural/substantive unconscionability framework and FAA preemption issues)
- Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63 (2010) (validity of delegation clauses under the Federal Arbitration Act)
- Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991) (statutory claims may be subject to arbitration)
- 14 Penn Plaza LLC v. Pyett, 556 U.S. 247 (2009) (employment agreement can require arbitration of federal statutory claims)