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Under Texas law, an arbitration clause may be added to an at-will employment agreement at the employer's sole discretion, so long as the employee has 30 days notice of the change and thereafter continues employment, according to the Fifth Circuit Court of Appeals.
In Armstrong v. Associates Intern. Holdings Corp., No. 06-11177, 2007 WL 2114512 (5th Cir. July 24, 2007), Armstrong was hired by CitiFinancial, a division of Associates International. Later, CitiFinancial modified the employment agreements with its at-will employees by adding an agreement to arbitrate employment claims, and notifying employees of the change through a memorandum and revised employee handbook. Armstrong acknowledged that he received these documents by signing each of them.
After Armstrong resigned from CitiFinancial, he filed a court complaint, bringing claims arising out of his employment relationship with CitiFinancial. In accordance with the agreement to arbitrate, CitiFinancial brought a motion to compel arbitration and dismiss the claims. Armstrong opposed the motion, maintaining no valid agreement to arbitrate existed. The district court granted the motion, and Armstrong appealed.
The Court affirmed the district court's grant of the motion to compel, finding that a valid agreement existed. Applying Texas law, which allows employers to modify terms of at-will employment upon notice and acceptance of the changes, the Court found that Armstrong had agreed to the arbitration modification. According to the Court, Armstrong consented by receiving notice of the change in terms through the memorandum and the revised employee handbook, and consented to that change by continuing employment beyond 30 days after notice was received.
Armstrong alleged that he had mistakenly signed the documents under the impression that the new arbitration policy did not apply to employees in his particular division. The Court rejected this argument, noting that Texas law required that the mistaken party must bear responsibility for any such error.
Armstrong then argued that the new policy was not supported by independent consideration, but the Court found the parties' contractual obligation to arbitrate any disputes was, by definition, sufficient consideration under Texas law.
Armstrong also maintained that the agreement to arbitrate was illusory, because CitiFinancial reserved the right to revise, amend, modify, or discontinue the policy at any time. However, the Court did not find that this discretion made the agreement illusory, since Texas law required 30 days notice of any change and continued employment thereafter for any change in terms to become effective.
Finally, Armstrong's argument that he was fraudulently induced into signing the documents was rejected, because Armstrong had failed to introduce any evidence that CitiFinancial made any material and false representations to induce Armstrong into the agreement.
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