Oregon employers that require arbitration for employment-related disputes recently received some good news from the Oregon Supreme Court.  In Gist v. ZoAn Management, Inc., the Court rejected the plaintiff’s argument that his arbitration agreement was unenforceable because it limited the arbitrator’s authority to award him relief.  Instead, the Court ruled that the arbitration clause was fully enforceable.

The facts of the case are straightforward.  ZoAn Management is a delivery service that hired Gist as a driver and classified him as an independent contractor rather than as an employee.  Gist filed a putative class action lawsuit against ZoAn, claiming that he had been misclassified as an independent contractor and thus did not receive the wages he was entitled to under Oregon law as an employee.  ZoAn filed a motion to compel arbitration pursuant to the Driver Services Agreement (“DSA”) that Gist signed at the outset of his engagement.  The DSA contained a clause requiring that “any dispute, claim or controversy” arising from the DSA be resolved through mandatory arbitration.  Gist argued that the DSA’s arbitration clause was “unconscionable,” a legal doctrine that allows a court to strike a contract provision if it deems the provision so fundamentally unfair that it should not be enforced.  Specifically, Gist pointed to language stating that the arbitrator could not “alter, amend or modify” the terms of the DSA, which Gist argued would prevent the arbitrator from concluding that he was in fact an employee rather than an independent contractor and was therefore entitled to damages. 

The Supreme Court rejected Gist’s argument.  The Court pointed to the language in the DSA granting the arbitrator the authority to resolve “any dispute, claim or controversy” as well as language allowing the arbitrator to strike specific portions of the DSA that were unenforceable while preserving the agreement as a whole.  Read together, these clauses meant that the agreement could not be plausibly read to prevent the arbitrator from deciding the merits of Gist’s claims and awarding him damages or other relief if he prevailed.  ZoAn conceded as much in its arguments to the Court, which likely helped the Court reach its conclusion that the arbitration clause was enforceable.

There are a few “lessons learned” from Gist decision.  First, Oregon courts remain willing to enforce arbitration agreements, even those involving individuals who assert claims under employee-protection laws like Oregon’s wage and hour statutes.  Second, courts will apply a “common sense” reading to the language in an arbitration agreement as a whole instead of focusing narrowly on a particular provision.  Finally, the decision serves as a good reminder that arbitration agreements address how a dispute will be resolved but don’t necessarily change the outcome of the dispute: ZoAn will face the same substantive claim from Gist that it misclassified him as an independent contractor, with the only difference being that the dispute will play out in arbitration rather than in court.

If you have questions about the Court’s ruling, or about requiring employees to resolve disputes through arbitration, please feel free to reach out to any of our labor and employment attorneys.