Appeals court to arbitration litigants: You are stuck!

Arbitration isn’t a no-lose proposition for employers. A very recent case from the U.S. 5th Circuit Court of Appeals (which covers Texas employers) drives home the point. While the employer prevailed, the court’s opinion carries the seeds of many a future employer heartache.

Question: One bite or two?

Tiffany Jones worked for Michaels Stores. She agreed to arbitrate any employment dispute with the company. She was terminated. She filed an arbitration claim alleging her termination was inconsistent with the employee handbook, and she lost.

Not content with the result (called an “award” in arbitration law lingo), Jones filed a claim under Title VII of the Civil Rights Act of 1964 in federal court alleging unlawful discrimination. The court put the suit on ice, sending it to arbitration under the company’s program.

The arbitrator said Jones should have raised the Title VII claim in the first arbitration. Because she hadn’t done so, the charge was dismissed under a legal doctrine called res judicata, i.e., the matter already has been (or should have been) adjudicated by a competent court.

Answer: It doesn’t matter

Jones argued the arbitrator misunderstood the concept of res judicata, which she said allowed her to sue twice. In other words, the first claim, which raised only the handbook issue, didn’t bar or preclude her from pursuing the second one, the Title VII claim.