Appeals Court Affirms Employer’s Ability To Compel Arbitration In Massachusetts – Litigation, Mediation & Arbitration



United States:

Appeals Court Affirms Employer’s Ability To Compel Arbitration In Massachusetts


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Mandatory arbitration clauses for employment disputes have
received a great deal of attention in recent years. In the First
Circuit, there is now more clarity regarding the factors used to
determine the enforceability of online arbitration agreements.

Overview

The First Circuit Court of Appeals’ recent decision, Emmanuel v. Handy Technologies, Inc.,
concerns the appellant’s 2015 putative class action against
Handy Technologies, Inc., which operates an online platform that
allows users to hire housekeepers and other providers of home
services. One of the main claims in the putative class action suit
is that Handy misclassified workers as independent contractors and
thus failed to pay them an appropriate minimum wage, allegedly in
violation of the federal Fair Labor Standards Act (FLSA). Handy
moved to dismiss the lawsuit and compel individual arbitration
based on certain arbitration provisions set forth in Handy’s
online agreement. The U.S. District Court for the District of
Massachusetts granted Handy’s motion to dismiss, and the First
Circuit Court of Appeals affirmed the decision.

Factual and Procedural Background

The appellant, Maisha Emmanuel, had a background in nanny work
and housecleaning. In May 2015, she discovered Handy and completed
an online application form to book jobs through the service.
Through two separate uses of Handy’s online platform, during
which she completed her application and was able to sign up for
various jobs, she accepted Handy’s terms of agreement, part of
which included a mandatory arbitration clause. After approximately
1 month of work (and having completed multiple job assignments),
Emmanuel stopped using the platform to book jobs, alleging that she
had not received pay for some of those jobs. Following this break
in use, Emmanuel again utilized the Handy platform, and in the
course of doing so, accepted Handy’s terms of agreement for a
third time.

Two months later, in July 2015, Emmanuel filed a putative class
action, alleging claims under the FLSA and the Massachusetts Wage
Act. In moving to dismiss, Handy “argued that Massachusetts
law applied and that … Emmanuel was bound” by her acceptance
of Handy’s terms of agreement, which included mandatory
arbitration of the claims at issue and a waiver of the ability to
bring a class action lawsuit. In its motion to dismiss, Handy
argued that “Emmanuel had entered into the Agreement with the
company in three different instances”: when she originally
completed her online application to use the service, “when she
downloaded the mobile app, and when she logged in to the website to
obtain her personal records.” Emmanuel opposed the motion to
dismiss on a number of grounds, most significantly that she had not
entered into an agreement and that the agreement was unenforceable
due to the doctrine of unconscionability.

The district court sided with Handy and agreed that Emmanuel had
entered into an agreement on the three previously mentioned
occasions to submit the claims in question to arbitration and that
she had waived her right to bring a class claim. The court also
rejected Emmanuel’s unconscionability argument. Ultimately, the
district court dismissed Emmanuel’s putative class claim and
directed Emmanuel to “submit her individual claims to
arbitration.” Emmanuel timely appealed, seeking review only of
the enforcement of the arbitration provision and not challenging
the enforcement of the class action waiver.

The Court of Appeals’ Analysis and Decision

In considering Emmanuel’s appeal, the First Circuit focused
on Emmanuel’s selection of “Accept” on the screen
containing the initial terms of the agreement when she first used
Handy’s online platform to begin her application to use the
service. The court found that “the ‘form’ of the
Agreement … clearly point[ed] in favor of the conclusion”
that she knew she was agreeing to be bound by Handy’s terms, as
the language at the time stated “To continue, please accept
the revised Independent Contractor Agreement” (and the screen
with this language displayed a portion of the text of the
agreement). The court further noted that even though only a portion
of the text was visible, that portion clearly referenced additional
text of the agreement that could be viewed by scrolling down.
Further, the text was cut off in such a way that suggested
additional text existed. The court also stated that Emmanuel could
not succeed on an argument that she did not receive reasonable
notice of the arbitration provision because she chose not to review
it despite having had an opportunity to do so. The appeals court
cited a recent Supreme Judicial Court of Massachusetts decision,
which cited a state court ruling that clarified that a party may be
“bound by [the] terms of [a] contract regardless of whether
[the] party actually read [the] terms.”

The First Circuit also briefly addressed Emmanuel’s
unconscionability argument. The court stated that under
Massachusetts law, “a party invoking [the unconscionability]
doctrine must establish ‘both substantive unconscionability
(that the terms are oppressive to one party) and procedural
unconscionability (that the circumstances surrounding the formation
of the contract show that the aggrieved party had no meaningful
choice and was subject to unfair surprise).'” The court
determined that Emmanuel’s unconscionability argument was not
directed specifically to the agreement to arbitrate, but rather was
‘”a challenge[] to the validity of an entire contract
which contains an arbitration clause.'” (Brackets in the
original.) The court determined that the unconscionability argument
failed, as the arbitration clause was severable from the rest of
the contract, and “‘the issue of the contract’s
validity is considered by the arbitrator in the first
instance.'”

Finding that “Emmanuel did have reasonable notice of the
terms” of Handy’s agreement, and had no basis for her
unconscionability argument, the court affirmed the lower
court’s order to compel arbitration and dismiss Emmanuel’s
putative class complaint.

Conclusion

The First Circuit’s decision in Emmanuel v. Handy
Technologies, Inc.
 has helped to clarify the contours of
online agreements and solidify the use of arbitration clauses in
the employment context.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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