When I was a young lawyer, the Alabama Supreme Court really disfavored arbitration. They would find almost any excuse to give somebody their “day in court,” instead of enforcing contractual dispute resolution. Times have certainly changed. Binding decisions from the United States Supreme Court, and election of pro-business candidates to the Alabama Supreme Court have lead to a sea-change. Now, the Alabama Supreme Court almost always enforces arbitration agreements.
This point recently hit home in Bridgestone Americas Tire Operations, LLC v. Adams, No. 1160877, 2018 WL 1355966 (Ala. Mar. 16, 2018). Ottis Adams was hired by BFS Retail and Commercial Operations (“BFS”) in 2006. When he was hired, Adams signed BFS’s Employee Dispute Resolution Plan which required arbitration of almost all employment disputes. At some point, Adams changed employers from BFS to a sister company — Bridgestone Americas Tire Operations, LLC (“Bridgestone”). Adams left Bridgestone in 2016 and began work for a competitor — McGriff Tire Company. Bridgestone then sent a letter to McGriff stating that Adams’s employment violated a noncompetition and nonsolicitation agreement signed by Adams. Bridgestone also suggested that Adams violated a duty of loyalty by selling tires for McGriff while still employed by Bridgestone.
McGriff terminated Adams’s employment, and Adams sued Bridgestone for interference with his business relationship with McGriff and for defamation. Bridgestone moved to dismiss the lawsuit and compel arbitration. Adams convinced the trial court that Bridgestone was not a named party to the the BFS agreement, and that court denied the motion. So, Bridgestone appealed.
The Supreme Court compelled arbitration for two reasons. First, the BFS agreement required arbitration of “all disputes covered by that plan, not just disputes with BFS.” Second, the agreement applied to all “sister companies,” “related companies,” and “affiliate companies” of BFS. Even if Bridgestone was not a named party to the agreement, it fell within the definition of a “sister company,” “related company” or “affiliate company.”
Adams provides guidance to employers who want to avoid trial courts and jury trials. By broadly wording an agreement to cover all disputes related to employment, and by making the agreement applicable to any sister companies or affiliates, employers can avoid litigation and compel arbitration.
Merry Christmas! At about this time last year, I tried to provide some insight on the dangers of Christmas hams in the workplace: The Dangers of Christmas Hams. This year, in my never-ending quest to provide hard-hitting legal updates, I bring you a cautionary tale of assault by a department store Santa Claus: Honeycutt v. Louis Pizitz Dry Goods, Co., 235 Ala. 507 (Ala. 1938).
This case is from 1938, so it’s what a lawyer might call “well-established law.” As part of its holiday advertising, the Pizitz Department Store in Birmingham sent out into the community a truck with a full band playing music and an employee dressed as Santa Claus. The band attracted a crowd and the Santa Claus threw presents and candy. Unfortunately, an “all day sucker” struck Mrs. Linnie Honeycutt in eye. Here is the Supreme Court’s recitation of the facts:
The evidence is without dispute that the defendant’s advertising scheme attracted several hundred women and children, who surrounded the truck carrying the band; defendant’s servant dressed as Santa Claus. That some of those in the crowd stood from seventy to seventy-five feet away from the truck; and that defendant’s servant standing in the truck threw with great force the articles being distributed into the crowd, and one of said “lollypops” struck plaintiff in the eye, producing an abrasion of the sclera of the eyeball across the pupil, resulting in an infection causing much pain and suffering and, there is evidence tending to show, causing partial dimness of the sight necessitating the use of spectacles which plaintiff had not before had to use.
Honeycutt, 235 Ala. at 509 (emphasis added).
A jury found in favor of Mrs. Honeycutt and Pizitz appealed, arguing that this was just an “accident.” Unfortunately, the Supreme Court disagreed: “If the missiles thrown — the lollipops — were of such nature and character as that they were liable to produce injury, and were thrown into the crowd of women and children with such force as to cause injury, the jury was warranted in finding the defendant liable under the [claim of assault and battery].”
The Honeycutt case doesn’t provide any earth-shaking principles of law. But, it does reinforce one lesson which employers should already know: employers can be held responsible by a jury for the actions of their employees — even if the employee is Santa Claus.
Last week, the Alabama Supreme Court ruled that Alabama taxpayers can sue to void “illegal” government employment contracts. Ingle v. Adkins, No. 1160671, 2017 WL 5185288 (Ala. Nov. 9, 2017). At issue was an employment contract between the Walker County Board of Education and the Superintendent of the Walker County Schools. After he was re-elected as Superintendent in 2014, Jason Frank Adkins signed an employment contract with the Walker County school board. The contract provided: a $159,500 salary with annual pay raises; a $1,000 per month travel stipend; reimbursement for a cell phone; and, a promise to allow him to return to his previous job as a tenured employee.
Apparently, Sheila Mote Ingle thought that contract was excessive. So, she sued, claiming that, as a taxpayer, she was entitled to have the “unconstitutional, illegal and void” contract vacated. Ms. Ingle also sought to recover monetary amounts that she claimed were improperly paid to Mr. Adkins. Mr. Adkins and the school board immediately moved to dismiss Ingle’s law suit. They claimed that the Alabama Constitution of 1901 confers immunity from law suits to them, and that Ms. Ingle had no “standing” to challenge the contract, because she was not a party to it. Without giving a specific reason, a trial court in Walker County granted that motion to dismiss and Ms. Ingle appealed.
The Alabama Supreme Court found that Ms. Ingle was entitled to pursue her claims to vacate the contract, but not her claims for money. The Court reiterated a string of cases holding that Alabama School Boards and Superintendents are absolutely immune from claims for money damages under the Alabama Constitution. But, the Court refused to extend that immunity to claims for declaratory and injunctive relief. In short, the Court found that immunity could not bar Ms. Ingle’s claim to have the employment contract declared invalid.
The Supreme Court also rejected the Board’s standing defense. The Court found that its cases have “continually held that taxpayers have standing to seek an injunction against public officials to prevent illegal payments from public funds.”
Accordingly, the Supreme Court reversed dismissal of Ms. Ingle’s case to allow her to pursue her theory that the contract between Mr. Adkins and the School Board is illegal. At the same time, the Court refused to comment on whether her actual theories had any merit. That decision will come at a later date after the parties fully litigate the issue.
Alabama’s Workers’ Compensation Act provides employers with an interesting trade-off. Employees who are injured on the job are entitled to have their medical bills paid by the employer and receive compensation for any resulting disability. But, the amount of disability benefits are specifically set-out and limited by the Act. Workers’ Compensation is a no-fault system. If an employee is injured, he or she is entitled to benefits. Here’s the trade-0ff. In the vast majority of cases, the Workers’ Compensation Act prohibits employees from suing their employer for negligence, wantonness or punitive damages. In short, the Workers’ Compensation Act makes it easier for employees to recover for their injuries, but limits the ability of employees to sue their employers and the amount they can recover.
Of course, there are always exceptions to any law. The Workers’ Compensation Act also recognizes a limited set of cases in which the employee can sue his or her co-employees for punitive damages. If a co-employee engages in “willful conduct” that causes injury to another employee, the co-employee can be sued. Generally, the Act recognizes four types of “willful conduct”: (1) acting with a purpose, intent or design to injure another; (2) willful and intentional removal from a machine of a safety guard or safety device provided by the manufacturer of the machine with knowledge that injury or death would likely or probably result from the removal; (3) intoxication that causes injury or death of a co-employee; and, (4) willful and intentional violation of a specific written safety rule of the employer after written notice.
Over the years, employees have attempted to expand the reach of those four examples of “willful conduct.” Last week, the Alabama Supreme Court rejected such an attempt in Saarinen v. Hall, No. 1160066, 2017 WL 3821732 (Ala. Sep. 1, 2017). In that case, Louis Hall was injured by a power saw, which was manufactured with a guard that was insufficient to protect Hall. At least a month before he was injured, his employer purchased a replacement saw with a better guard from a different manufacturer. But, the replacement saw was not installed because his employer was too busy to change out the saws.
Hall injured his hand on the saw with the insufficient guard, and then sued his supervisors for “willful conduct.” Hall claimed that their failure to install the new saw was equivalent to the willful and intentional removal of a safety guard. The Alabama Supreme Court rejected that argument: “Under the facts in this case, the failure to install another, presumably safer, saw that was present on the premises but that had not been put into operation and that was manufactured by a different manufacturer than the saw that injured the plaintiff is not the equivalent of the removal of a safety guard so as to constitute willful conduct ….” Saarinen, 2017 WL 3821732 at *3. Interestingly, the Supreme Court expressly refused to decide whether the failure to install a replacement machine manufactured by the same manufacturer might be equivalent to removal of a safety device.
The Alabama Supreme Court loves arbitration. Arbitration is a private dispute resolution process. As part of an employment contract, an employer and employee can agree that any work-related dispute will be privately-resolved through arbitration, rather than through a law suit in court. In SSC Selma Operating Co. v. Fikes, No. 1160080, 2017 WL 2209884 (May 19, 2017), the Alabama Supreme Court required arbitration of a retaliatory discharge claim under Alabama law.
The Alabama Legislature has authorized several types of retaliatory discharge claims, but the most common claim arises from an allegation that an employer terminated an employee because that employee filed a claim under the Alabama Workers’ Compensation Act. See Ala. Code § 25-5-11.1. In Fikes, the employee claimed that she returned to work following an on-the-job injury and was fired by her employer. She sued for retaliatory discharge under Section 25-5-11.1.
But, the employee previously agreed to an Employment Dispute Resolution program, which required arbitration of all “employment related disputes,” except disputes that “relate[d] to worker’s compensation.” The employee argued that her retaliation claim “related to workers’ compensation,” and should not be arbitrated, because she was fired because of her workers’ compensation claim. Nevertheless, the Supreme Court disagreed. The Court found that the intent of the agreement was to require arbitration of “those employment-related disputes the [employee] would ordinarily be entitled to have resolved by a jury trial, i.e., disputes sounding in tort ….”
The Fikes case is another in a long line of recent cases from the Alabama Supreme Court requiring arbitration. Arguably, these decisions reflect a “strong federal policy favoring enforceability of arbitration contracts ….” Koullas v. Ramsey, 683 So.2d 415, 416 (Ala. 1996). Regardless of the reasons, if an employer enters into a valid arbitration agreement with an employee, the odds are substantial that Alabama’s courts will require arbitration of almost any employment-related claim.
Christmas is only three days away. So, I decided to provide a review of three somewhat amusing cases in Alabama involving the interplay of the holidays and the workplace.
Don’t Give Employees Heavy Christmas Hams
Many employers give Christmas hams to employees. Be warned: if the ham is too heavy you might wind up paying workers’ compensation. See Moesch v. Baldwin County Elec. Memb. Corp., 479 So.2d 1271 (Ala. Civ. App. 1985). In Moesch, the employee injured her back at the end of the work day, when she picked up a 20-pound Christmas ham given by her employer. The Court found that giving Christmas hams “would tend to boost the morale of employees, which would be beneficial to defendant.” Moesch, 479 So.2d at 1273. As a result, the court found that the employee’s injury “arose out of and in the course of” her employment, entitling her to workers’ compensation benefits.
It’s OK to Allow Dancing at Christmas Parties
While ham-based injuries appear to be compensable, dance injuries are not. See Anderson v. Custom Caterers, Inc., 185 So.2d 383 (Ala. 1966). In Anderson, an employee was injured as a result of a fall she sustained while dancing at a Christmas party. The party was held at the employer’s place of business and alcohol was served. The employee argued, like the employee in Moesch, that the employer received a benefit from the morale boost to employees. Nevertheless, the Court found that the injury did not arise out of or in the course of employment, and the employee was not entitled to workers compensation.
Holiday Pay Can Save You From an Unemployment Claim
In Etowah County, a steel foundry closed for two weeks over the holidays. A collective bargaining agreement provided that employees received “holiday pay” and were paid a full day’s wage for Christmas Day and New Years day, even though the foundry was closed. Despite that generosity, employees claimed that they were unemployed during the two-week closure and sought unemployment benefits. See Autwell v. State Dept. of Indus. Rel., 249 So.2d 625 (Ala. Civ. App.) Nevertheless, they could only be considered unemployed if they did not receive “wages” as defined by the unemployment compensation statute. The Autwell court found that the holiday pay was sufficient “wages” and affirmed denial of the claim for benefits.
As I understand the procedural nature of potential discipline, each United Methodist Church Conference will be responsible for imposing any possible discipline. Nevertheless, the lawyer in me wondered if Alabama courts would review any decision by a Conference to terminate the employment of an LGBT minister.
Coincidentally, the Alabama Supreme Court recently issued a decision concerning removal of a minister. St. Union Baptist Church, Inc. v. Howard, No. 1141132, 2016 WL 2848391 (May 13, 2016). Importantly, Howard was not a case involving an LGBT minister. Instead, it involved efforts by members of a congregation to terminate a pastor because of issues such as “lack of spiritual and financial leadership.” Justice Lynn Stuart authored an opinion in which the Court found that the dispute was “was a spiritual and ecclesiastical matter in which the court could not interfere without violating both federal and state constitutional provisions.”
The Howard decision closely mirrored the extensive analysis provided by the Supreme Court in Ex parte Bole, 103 So.3d 40 (Ala. 2012). Bole was a case involving a United Methodist minister who sued for defamation and the tort of outrage after he was removed by the North Alabama Conference of the United Methodist Church. The Court refused to review those claims because they were “intertwined with the underlying investigation by the Conference, with the resolution, and with the Conference’s ultimate decision to remove” the pastor from ministry. Bole, 103 So.3d at 72.
Based upon Howard and Bole, I think it is unlikely that an Alabama state court would accept a legal challenge filed by a minister removed from the pulpit because of his or her LGBT status. Howard recognizes a slim possibility that a claim for purely contractual disputes might be justiciable. But, where the dispute centers on spiritual or ecclesiastical matters, such as the theological propriety of LGBT ministers, I think the odds are unlikely that the courts will interfere with church decisions.
The Alabama Supreme Court recently upheld an award of $600,000 in compensatory damages to an “at will” employee who sued his employer for fraud. SeeFarmers Insurance Exchange v. Morris, No. 1121091, 2016 WL 661671 (Ala. Feb. 12, 2016). In Morris, the employee was working as an independent insurance agent at his father’s insurance agency. He wanted to continue working for his father, but also join Farmers Insurance Company as an agent. He repeatedly asked Farmers representatives if he could work for both his father and Farmers. He was told that such a relationship was permissible. Although there was conflicting evidence, the jury found that the employee was ultimately terminated by Farmers because of a conflict of interest policy which actually prohibited the employee from working for both Farmers and his father.
The employee argued that Farmers fraudulently induced him into giving up business with his father’s agency — business which Farmers retained after termination. A crucial element of fraud is detrimental reliance — the recipient of a promise takes detrimental action in reliance on the promise. In this case, the employee claimed that he detrimentally relied upon Farmers’ promise that there was no conflict of interest.
Farmers argued that the employee was an “at will” employee of Farmers, who could be terminated from employment at any time. As a result, he could not rely upon his belief that he would continue to work at Farmers and receive payment from Farmers in the future. The Alabama Supreme Court rejected that argument: “When an employee leaves one job for another based on a representation by the new employer regarding the new job that is not true at the time it is made, the new employer cannot hide behind the fact that Alabama law enforces or reads into the new employment contract an ‘at will’ clause to avoid the consequences of its fraud.”
The key lesson for employers is to attempt to learn all of the promises made to potential employees in the course of interviews. This can be a difficult task, but the key is documentation. In the course of interviews, executives need to make comprehensive notes of the questions asked by applicants and the answers given by the executive. With that documentation, employers can better defend potential claims for fraud based upon the interview process.