Citation. 22 Ill.199 F. Supp. 2d 771 (M.D. Tenn. 2002)
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Brief Fact Summary.
Plaintiff, an employee of Kentucky Fried Chicken (KFC), brought suit against Defendant, a KFC franchisee, alleging sexual harassment.
Synopsis of Rule of Law.
An arbitration agreement that precludes a cause of action, thereby stripping a plaintiff of certain claims she could otherwise bring, is unconscionable.
As part of her employment contract with Defendant, Plaintiff was asked to sign a document entitled “Arbitration of Employee Rights,” which called for submission of employment-related claims to arbitration. After Plaintiff brought her sexual harassment suit in Federal Court, Defendant filed a motion to compel arbitration, seeking to have Plaintiff’s federal claims stayed until the completion of arbitration. Defendant’s main contention is that, because Plaintiff agreed to arbitration as a condition to her employment, she could not otherwise bring federal question claims against Defendant.
Does a plaintiff give up her right to bring federal claims against her employer when she signs an arbitration agreement as a condition of employment?
No. The Defendants’ Motion to Compel Arbitration was denied.
The Court held, while arbitration agreements are favored and mandatory arbitration is presumed valid, the waiver of rights associated with such an agreement must be both knowing and clear. In considering whether Cooper waived her rights, the Court considered several questions.
First, the Court looked to see if there was an agreement between the parties. Because Plaintiff signed a KFC form, she claimed defendant was not a party to the agreement and she is not bound to the agreement in this case. This argument was dismissed, because Defendant was considered to be an agent of KFC.
Next, the Court considered whether there were reasons to set aside the agreement. At this stage, the Court considered whether the agreement was unconscionable and thereby unbinding.
In this case, the Court found the agreement was unconscionable because it required Plaintiff to waive her rights to bring certain federal claims, in favor of arbitration. Particularly, because Plaintiff was desperate for employment, she was put in an unequal position when signing the agreement, regardless of the fact that KFC also agreed to arbitration (which was favorable to it). The Court also held that the cost of arbitration made enforcement of the agreement unconscionable.
While there is a presumption in favor of arbitration agreements, a plaintiff may not be compelled to arbitrate when she can show a disparity in her position that would render the agreement unconscionable.