Employment Law Daily Can’t rule on arbitration agreement’s enforceability before addressing delegation to arbitrator
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Friday, March 2, 2018

Can’t rule on arbitration agreement’s enforceability before addressing delegation to arbitrator

By Lorene D. Park, J.D.

In a workers’ comp retaliation case, the West Virginia Supreme Court reversed the denial of an employer’s motion to compel arbitration, explaining that because the employee did not challenge a provision delegating to an arbitrator any disputes over application of the arbitration agreement, “the circuit court had no authority to determine whether the arbitration agreement was a contract of adhesion, whether it contained an applicable exclusion or whether it was superceded by statute, because those are disputed matters that the delegation provision required an arbitrator to resolve” (Family Dollar Stores of West Virginia, Inc. v. Tolliver, February 27, 2018, per curiam).

The employee, who worked as a store manager for Family Dollar Stores, suffered from mental health issues with physical symptoms after being forced into a closet during an armed robbery. She received workers’ compensation benefits and, according to her lawsuit, was fired in retaliation for seeking such benefits. She also asserted various tort claims. The employer filed a motion to dismiss and compel arbitration.

Motion to compel arbitration denied. In its motion, the employer pointed to a “delegation provision” in the arbitration agreement that required all disputes involving the application of the arbitration agreement to be resolved by an arbitrator. The employee did not file a response. A hearing was held and the employer again raised the issue of the delegation provision, though it did not appear from the record that either the employee or court addressed that provision. The employer’s motion was denied after the court determined that the arbitration agreement was a contract of adhesion, that it excluded coverage for workers’ comp retaliation claims, and that Section 23-5A-3 superceded private arbitration here.

Should have analyzed delegation first. Reversing, the West Virginia Supreme Court agreed with the employer that as a result of the delegation provision, the lower court could not address defenses to the arbitration agreement without first addressing the validity of the delegation provision, which it failed to do.

The court pointed to the Supreme Court’s DirecTV, Inc. v. Imburgia decision, which had led the state high court, in Schumacher Homes, to set out this principal of law: “where a delegation provision in a written arbitration agreement gives to an arbitrator the authority to determine whether the arbitration agreement is valid, irrevocable or enforceable under general principles of state contract law, a trial court is precluded from deciding a party’s challenge to the arbitration agreement. When an arbitration agreement contains a delegation provision, the trial court must first consider a challenge, under general principles of state law applicable to all contracts, that is directed at the validity, revocability or enforceability of the delegation provision itself.”

Thus, the court further explained, unless a plaintiff challenges the delegation language specifically, it must be treated as valid under the FAA and must be enforced, leaving any challenge to the validity of the arbitration agreement as a whole for the arbitrator. Applying that principle here, because the employee failed to attack the delegation provision, “the circuit court had no authority to determine whether the arbitration agreement was a contract of adhesion, whether it contained an applicable exclusion or whether it was superceded by statute, because those are disputed matters that the delegation provision required an arbitrator to resolve.”

The court reversed and remanded for entry of an order dismissing the case and compelling arbitration.

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