Missouri Supreme Court Compels Arbitration, Finding Adequate Consideration for Arbitration Agreement with At-Will Employee

ABSTRACT: Missouri Supreme Court holds that there is adequate consideration for an at-will employee's agreement to arbitrate and compels arbitration of his wrongful termination and discrimination claims.

In Soars v. Easter Seals Midwest, 563 S.W.3d 111 (Mo. banc 2018), the Missouri Supreme Court ordered that at-will employee’s case be arbitrated and denied the employee’s challenge to the validity of the arbitration agreement as a whole.

As a condition of employment with Easter Seals Midwest (ESM), a charitable organization, each new, at-will employee is required to sign an arbitration agreement. The arbitration agreement provides that, as consideration for employment, the employee will submit all disputes and claims arising out of the employment to binding arbitration. In turn, ESM also agrees to submit all disputes and claims arising out of the employment to binding arbitration. The ESM arbitration agreement also included a delegation clause providing that the arbitrator and not any court had the exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of the arbitration agreement. 

Plaintiff Lewis Soars signed the arbitration agreement as a condition of his at-will employment with ESM, and three months later. ESM terminated his employment after he refused to participate in an internal investigation involving accusations against him of abuse or neglect of ESM’s clients. In response, he filed suit against ESM in circuit court for wrongful discharge and race discrimination. ESM filed a motion to compel arbitration. Plaintiff argued the arbitration agreement and delegation clause lacked consideration and mutuality and were unconscionable. The circuit court denied ESM’s Motion to Compel Arbitration, and the Court of Appeals affirmed.

The Supreme Court, however, reversed. It held that arbitration must be compelled if the parties signed an arbitration agreement that contains a valid delegation clause mandating that the arbitrator has “exclusive authority to decide threshold issues of interpretation, applicability, enforceability, or formation.” Whether or not the arbitration agreement as a whole is valid is for the arbitrator to determine so long as the delegation provision, standing alone, is valid. In this case, the Court found that in the delegation provision both parties mutually agreed to arbitrate all threshold questions of arbitrability. “Because neither ESM nor Soars retains any unilateral right to amend the delegation clause nor avoid its obligations, the delegation clause is bilateral in nature and consideration is present.”  

Significantly, and surprisingly, this is the Missouri Supreme Court’s first opinion holding that referral to an arbitrator should occur, notwithstanding a party’s challenge to the validity of the arbitration agreement as a whole. While the United States Supreme Court has made this same ruling numerous times over many decades, this was the Missouri Supreme Court’s first occasion to consider the issue.

Notably, the Court found that an initial offer of at-will employment was sufficient consideration for the contractual promise to arbitrate claims. This was a major point of disagreement for the dissenting justice, who would have concluded that the arbitration agreement was unenforceable because at-will employment, which by its very nature is no employment contract at all, can provide no legal consideration for the arbitration agreement. According to the dissent, because a fundamental component of the at-will employment relationship is the ability for either party to terminate the relationship at any time, there was no valid contract to support the arbitration agreement or the delegation provision. 

Going forward, the majority’s decision should provide comfort to employers that, under Missouri law, their arbitration agreements with at-will new-hires are enforceable and may include provisions placing all claims and controversies into the hands, in the first instance, of the arbitrator, including all objections to the existence, interpretation, application, and enforceability of the arbitration agreement itself.