By Andy Volin
The Tenth Circuit just ruled that an arbitration agreement between a massage student and her school was not enforceable, because it would not permit the effective vindication of the student’s statutory rights. Nesbitt v. FCNH, Inc., No. 14-1502 (10th Cir. Jan. 5, 2016). The dispute involved a massage student’s claim that, when she gave massages to members of the public as part of her training, she was acting like an employee and entitled to be paid. She brought a class action, asserting claims for unpaid wages under state law and the FLSA. The massage school moved to compel arbitration, based on a provision in her enrollment application.
The court refused to require arbitration. The provision did not adequately protect the student’s rights because, first, it required the student to pay half of the arbitrator’s fees (which would not be necessary if the case was decided in a court), and second, it was not clear that if the student prevailed, she would be entitled to an award of her attorney’s fees (which would be available under the FLSA in a court action). The massage school argued that these problems should not prevent enforcement because the provision had an opt-out clause, but the Court ruled that the opt out clause was only relevant to whether the parties had agreed to arbitrate. In addition, the court refused to remove the improper provisions and then enforce the agreement, because the provision had no clause by which the parties agreed the court could make those changes.
Acceptable terms for arbitration agreements continue to evolve in every jurisdiction across the country. What’s in your form?