7th Circuit Finds Employee Arbitration Agreement Unenforceable

The Seventh Circuit recently held that an arbitration provision could not be enforced by an employer against an employee because the employee’s employment agreement used a different name for the employing entity.

The controversy arose from a lawsuit initiated by the employee against the employer.  The defending employer had a different name than the employer named in the employment contract.  In an attempt to dismiss the lawsuit, the employer sought to invoke the arbitration provision in the employee’s employment contract.  The employer provided an affidavit from its Director of Human Resources to the lower court, which stated that the two names referred to the same employer.  Unpersuaded by the “conclusory” statement, the lower court found the employer failed to meet its burden by not establishing itself as the same entity named in the contract.  The lower court relied on both the statement and the fact the website using the prior employer name ceased to exist when the employer changed its name.

On appeal, the Seventh Circuit found the lower court did not abuse its discretion by relying on the website in its ruling.  The company had the burden to establish its right to enforce the arbitration agreement by proving to the court that there was no merger, but that the two names referred to the same entity.  Because the employer failed to revise its employee’s contracts and because the employer failed to provide sufficient evidence to the District Court, the arbitration agreement against the employee was found unenforceable.  According to the Seventh Circuit and District courts, the employer was not a party to the contract.