In McLeod v. General Mills (No. 15-3540, 8th Cir., April 14, 2017) the U.S. Court of Appeals for the Eighth Circuit addressed the issue of whether the Age Discrimination in Employment Act (ADEA) overrides the Federal Arbitration Act’s (FAA) mandate to enforce agreements to arbitrate according to their terms. This argument, which Liz Kramer (Arbitration Nation) refers to as “a get out of arbitration free card”, has been one of the few arguments available to employees wanting to avoid arbitration provisions.
The case involves a dispute over a severance agreement that General Mills offered 850 employees. The agreement released General Mills from all claims relating to their terminations, including ADEA claims, and provided for individual arbitration. Former employees who have signed the agreement sued General Mills under the ADEA. The former employees argued that the waivers were not “knowing and voluntary” as defined under Section 626(f)(1) of the ADEA. General Mills moved to dismiss and compel arbitration.
Reversing the district court’s decision denying General Mill’s motion, the U.S. Court of Appeals for the Eighth Circuit found that the ADEA does not contain a “contrary congressional command” overriding the FAA’s mandate to enforce the parties’ agreement to arbitrate substantive ADEA claims.
The plaintiff’s based their challenge on Section 626(f) of the ADEA which provides, “An individual may not waive any right or claim under this chapter unless the waiver is knowing and voluntary,” and Section 626(f)(3) which provides further that “the party asserting the validity of a waiver shall have the burden of proving in a court of competent jurisdiction that a waiver was knowing and voluntary.” The court described the logic of the plaintiff’s argument as follows: “First, by moving to compel arbitration of their claims, General Mills is ‘asserting the validity of a waiver,’ forcing them to to forego their ‘right to a jury trial and their ‘right’ to proceed by class action. Second, if General Mills wants to assert the validity of that waiver, it ‘shall’ (which they read as ‘must’) do so ‘in a court of competent jurisdiction’ (which they read as ‘not in arbitration.’)”
According to the court, this logic “fails at step one.” The Court reasoned that in asking the court to compel arbitration, General Mills was not asserting the validity of a waiver, given that under Section 626(f) the term waiver “refers narrowly to waiver of substantive ADEA rights or claims–not … the ‘right’ to a jury trial or the ‘right’ to proceed in a class action.”
The court cited to 14 Penn Plaza LLC v. Pyett (556 U.S. 247 (2009), as controlling the outcome of this case, to the extent that the Supreme Court in Pyett had held that an agreement to bring future claims in arbitration was not a waiver of “rights or claims” under Section 626(f)(1)(C) of the ADEA.