By Michael R. Lied, Esq.

Joann Melena joined Anheuser-Busch as a nonunion employee at its distribution center in Mt. Vernon, Illinois in February 1999.  In February 2000, Anheuser-Busch mailed its Mt. Vernon employees a letter which announced the implementation of a “Dispute Resolution Program.”  Attached were materials describing the new program, including a “Dispute Resolution Program Guide,” “Dispute Resolution Program Highlights,” and a “Dispute Resolution Program Policy Statement.”

The Program required binding arbitration and stated:
At the binding arbitration level, disputes that cannot be resolved through Level 1 *** or Level 2 *** are presented to a neutral third-party arbitrator for a final and binding decision.  The arbitrator essentially substitutes for a judge and jury who might decide the case in a court setting.  At the arbitration hearing, the arbitrator makes a decision after both sides have presented their positions.  If the arbitrator decides in favor of the employee, the arbitrator can award the same remedies that would have been available in court for the type of claim that was brought.”

The Program further explained that by continuing or accepting an offer of employment all employees to whom the policy was applicable “agree as a condition of employment to submit all covered claims to the dispute resolution program.”  The statement defined “covered claims” as employment-related claims against the company and individual managers acting within the scope of their employment regarding termination and/or alleged unlawful or illegal conduct on the part of the company.  The policy made clear that the new procedure did not change the employment-at-will relationship between the company and its employees.

On September 11, 2002, Melena suffered a work-related injury.  She filed a claim for workers’ compensation benefits.  While she was receiving temporary total disability benefits, Anheuser-Busch terminated her employment in March 2003.

Melena filed a complaint in the circuit court, alleging that Anheuser-Busch discharged her in retaliation for exercising her rights under the Illinois Workers’ Compensation Act.  Anheuser-Busch moved to dismiss the complaint and to compel arbitration or, in the alternative, to stay the proceedings and to compel arbitration.  The circuit court denied the motion.

The appellate court affirmed the circuit court’s order.  The appellate court held that, in order to be enforceable, an agreement to arbitrate claims like the one at issue must be entered into knowingly and voluntarily.  After considering the facts of this case, the appellate court concluded that even if Melena entered into the agreement knowingly, she did not do so voluntarily.

The issue presented to the Illinois Supreme Court was whether the mandatory arbitration provisions of Anheuser-Busch’s Dispute Resolution Program constituted an enforceable contract binding on Melena.

The parties did not disagree that resolution of the case concerned the Federal Arbitration Act.  Section 2 of the FAA compels judicial enforcement of arbitration agreements in any contract evidencing a transaction involving commerce.  Employment contracts are subject to the terms of the FAA except for those employment contracts which deal with transportation workers.
 
However, the parties disagreed whether litigating a claim for retaliatory discharge in state court is an important right which can only be relinquished through a knowing and voluntary waiver.

Although the U.S. Supreme Court has not spoken on the need for a knowing and voluntary standard in this context, several federal circuit courts of appeal have done so.  A split exists among the various circuits regarding the “knowing and voluntary” standard.  The appellate court found persuasive Prudential Ins. Co., of Am. v. Lai, 42 F.3d 1299 (9th Cir. 1994).  In, Lai, the Ninth Circuit reversed a district court order compelling arbitration of a sexual discrimination claim because the employee had not knowingly entered into the agreement to arbitrate employment disputes.

A different point of view as to the knowing and voluntary standard is one which holds that enforceability of a mandatory arbitration agreement between employer and employee turns on fundamental principles of contract law.

The Illinois Supreme Court agreed with those federal courts of appeal which base their analysis upon principles of contract law because it believed that approach was more faithful to the FAA.

The FAA’s plain language makes clear that arbitration agreements are enforceable except for cases involving state-law grounds for ordinary contract revocation.

Because the regular principles of contract law apply, the Illinois Supreme Court had to apply state law to analyze the contract question.  In other words, the court had to decide whether the parties’ agreement to arbitrate amounted to an enforceable contract under Illinois law.  It did.

In Illinois, an offer, acceptance and consideration are the basic ingredients of a contract.  Anheuser-Busch’s introduction of the Dispute Resolution Program, its mailing of materials related to the program to its employees, constituted Anheuser-Busch’s “offer.”  According to the court, by continuing her employment with Anheuser-Busch, Melena both accepted the offer and provided the necessary consideration.  The court cited to Duldulao v. Saint Mary of Nazareth Hosp. Center, 115 Ill. 2d 482, 490 (1987). 

Under Illinois law, continued employment is sufficient consideration for the enforcement of employment agreements.  Melena continued working for Anheuser-Busch for three years after the initial implementation of the Dispute Resolution Program in 2000 and for nearly two years after signing the acknowledgment form in 2001.  On these facts, the agreement to arbitrate claims arising from the employment relationship was deemed enforceable.

The court rejected the appellate court’s implication that Melena’s acceptance of the dispute resolution provisions in this case was illusory because Anheuser-Busch gave her little choice in this matter, because the agreement was offered on a “take it or leave it” basis.  Such a conclusion was contrary to Illinois and federal case law.

Melena argued that requiring arbitration in this case contravened the public policy underlying the tort of retaliatory discharge.  However, nothing in the Workers’ Compensation Act or in the decisions concerning retaliatory discharge preclude a waiver of a judicial forum for such claims.  With respect to Melena’s contention that retaliatory discharge claims further important social policies that cannot be achieved through arbitration, the Illinois Supreme Court echoed the views expressed by the United States Supreme Court in rejecting a similar argument advanced in the context of age discrimination claims.

The agreement in this case did not limit the remedies available to Melena in arbitration.  In fact, the agreement made clear that the arbitrator was free to award any remedy recognized under the law.  Therefore, the agreement was fundamentally different from one which the court refused to enforce in Midgett v. Sackett-Chicago, Inc., 105 Ill. 2d 143 (1984).  There, the court found the agreement to arbitrate unenforceable because it precluded employees from receiving punitive damages.  Such damages serve as a tool for compensating victims of retaliatory discharge and act as a deterrent to others to avoid such conduct.  Because the Anheuser-Busch arbitration agreement did not require Melena to forgo the full range of remedies available at law, arbitration could serve the same remedial and deterrent functions as litigation.
 
The court also noted that other courts have refused to enforce arbitration agreements where the arbitral costs borne by the employee were deemed to be so large and prohibitive so as to have the effect of precluding litigants from effectively vindicating their statutory rights.  Here, the agreement made clear that Anheuser-Busch would pay all costs, with the employee paying only a $125 fee.  The court did not believe such a fee would have the effect of precluding litigants from effectively vindicating their rights under the Workers’ Compensation Act. 

Melena v. Anheuser-Busch, Inc., 2006 WL 723496 (Ill. 2006)
Melena may be just as interesting for what it does not discuss, specifically Doyle v. Holy Cross Hosp., 186 Ill. 2d 104 (Ill. 1999).  In Doyle, plaintiffs were nurses who had worked for the hospital for a number of years.  In 1971, the hospital provided an employee handbook which contained what the Illinois Supreme Court found to be promissory language leading to an implied contract.

A number of years later, the hospital added disclaimers to the handbook and also promulgated policies indicating that its personnel policies and communications were subject to revision from time to time, and did not constitute an implied or express contract of employment. 

Plaintiffs were discharged and relied on the 1971 employee handbook.  The Illinois Supreme Court found that, after an employer was contractually bound to the provisions of an employee handbook, unilateral modification of the terms by the employer, to an employee’s disadvantage, failed for lack of consideration.  The requisite consideration for a modification that operates to the employee’s disadvantage is not supplied simply by the employee’s continued work for the employer. 

Arguably, Melena can be reconciled with Doyle because, even though Anheuser-Busch unilaterally imposed the arbitration policy, it was not really to the employee’s disadvantage, since it merely provided a different forum for the retaliatory discharge claim.  Even so, it is interesting that the Doyle case is never mentioned in Melena.

Michael Lied is a member of the Labor & Employment Group at Howard & Howard. He represents employers in a wide variety of employment, labor and immigration matters. For more information, please contact Michael Lied at (309) 672-1483 or  mrl@h2law.com .

Copyright 2006 Howard & Howard Attorneys, P.C. This publication is intended to provide information only and does not constitute legal advice.