West Virginia Supreme Court Upholds the Enforceability of Employer's Alternative Dispute Resolution Program

Employers in West Virginia who want to avoid litigating employment disputes in the courts received a significant victory. The West Virginia Supreme Court recently upheld a company's alternative dispute resolution (ADR) program, which required employees to litigate employment disputes through arbitration. The decision in Toney v. EQT, 2014 WL 2681091 (W.Va.) is an important victory for employers in West Virginia who would rather litigate employment disputes in a private setting than in the court system.

Beginning in 2007, EQT required certain employees to sign an ADR agreement in exchange for participation in a bonus program. The ADR agreement mandated arbitration for “any claim that is related in any way to the individual's employment with Equitable that is recognized in the federal or state courts where the employee works.” While employed at EQT, the Plaintiff signed the ADR agreement and collected bonuses under the bonus program for a five-year period until he was discharged.

After EQT terminated him, the plaintiff sued EQT in state court for wrongful discharge. The trial court dismissed the case based on EQT’s ADR program and the plaintiff appealed to the West Virginia Supreme Court on three grounds. First, the plaintiff argued there was no consideration to support the ADR agreement. The plaintiff asserted argued that he was already participating in the bonus program when he signed the ADR agreement and therefore, received no new consideration. Second, the plaintiff argued that participation in the bonus program was illusory because EQT's promise to pay the bonuses was not guaranteed and was based on the company's sole discretion. Finally, the plaintiff argued that the ADR agreement was unenforceable because it was unconscionable.

The Court rejected all three arguments and held that the ADR agreement was enforceable. First, the Court held that the ADR agreement was supported by adequate consideration because both EQT and the plaintiff were subject to the arbitration program. The Court also ruled that the bonus program was not illusory because employees that signed the ADR agreement were eligible to participate in the bonus program and that by signing the ADR agreement, the plaintiff remained eligible to receive bonuses, and in fact, did receive bonus payments over subsequent years. Finally, the Court held that because the plaintiff held an associate degree, a responsible position within the company and was given an opportunity to ask questions about the ADR agreement, the ADR program was not unconscionable.

Many employers use arbitration programs as a way to streamline employment litigation and avoid the excessive costs of discovery associated with employment claims, as well as to keep results of employment disputes confidential. The Toney decision provides important guidance regarding what an employer must do to render an ADR program enforceable, including making the obligation to arbitrate mutual to establish the required consideration and giving an employee an opportunity to ask questions about such an agreement to avoid a finding that the program is unconscionable.