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In a case of first impression in South Dakota, a United States District Court has held that continued employment constitutes adequate consideration to support an employment arbitration agreement. Baker v. Science Applications Int’l Corp., No. Civ. 06-4096, 2006 WL 2708546 (D. S.D. Sept. 21, 2006).
Baker reached an employment agreement with Science Applications International Corporation (Science Applications), after that company was awarded a contract to operate the U.S. Geological Survey Earth Resources Observation and Science Data Center (EROS). For over two decades prior to this agreement, Baker was employed as a software engineer at EROS. Science Applications was required by contract to retain all current EROS employees at the facility, but was free to alter the terms and conditions of their employment. Baker agreed to such a change by signing a two-page arbitration agreement in October 2002.
Upon Baker’s termination from employment in June 2005, Baker sued Science Applications under several employment law claims, to which Science Applications responded by moving to compel arbitration. The Court held that Baker was required to arbitrate his claims, despite his contention that the contract was invalid as a contract of adhesion lacking consideration.
The court found no absence of consideration because Baker understood that he was exchanging his waiver of the right to pursue his claims in a court of law for continued employment. This exchange did not deprive Baker of any statutory or common law remedies, since he was free to pursue his claims in an arbitral forum.
Finally, the mere fact that the arbitration agreement was a contract of adhesion did not necessarily mean that the contract was unenforceable. Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 32-33 (1991). Baker made no argument that he was incapable of reading or understanding the terms of the agreement, and he had the option of declining employment and seeking employment elsewhere, rather than agreeing to the arbitration clause.
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