Week Ending 7/20/12: Gove v. Career Systems Development

Alan Schorr’s Case of The Week ending July 20, 2012

Gove v. Career Systems Development Corp., No.11-2468 (1st Cir. [Maine] , July 27, 2012)

Last week’s Case of the Week featured a waiver of statutory rights contained in an employment application. This week’s case is eerily similar, but with a much different result. In this case, the First Circuit upheld the denial of a motion seeking to dismiss a Complaint for discrimination based upon an arbitration clause contained in a pre-employment application. In this case, the Plaintiff was never hired, allegedly because she was eight months pregnant.

The Plaintiffs in the two cases even have similar names. Last week’s plaintiff is Ann Gavin and this week’s plaintiff is Ann Gove. (Is Gavin the past participle of Gove?). In any event, Ms. Gove had been working for one employer, and when that employer’s contract ended, all employees were given an opportunity to apply to work for the new contract employer, the defendant herein. Ms. Gove signed the application, which included an arbitration provision. At the time of her interview she was visibly pregnant, and explained that she was due in five weeks. She was not hired, even though the position remained open and was being advertised. Ms. Gove filed with the Maine Human Rights Commission, who found reasonable grounds to conclude that she was discriminated against. When reconciliation failed, Ms. Gove filed suit.

The employer moved to dismiss based upon the arbitration provision, and the District Court denied the motion, finding that the agreement was ambiguous, and therefore invalid because Ms. Gove was never hired, and therefore never became an employee. The language of the agreement seems clear enough:

CSD also believes that if there is any dispute between you and CSD with respect to any issue prior to your employment, which arises out of the employment process, that it should be resolved in accord with the standard Dispute Resolution Policy and Arbitration Agreement ("Arbitration Agreement") adopted by CSD for its employees. Therefore, your submission of this Employment Application constitutes your agreement that the procedure set forth in the Arbitration Agreement will also be used to resolve all pre-employment disputes.

The First Circuit, in a 2-1 decision, held that the terms “prior to your employment”, “employment process” and “pre-employment” were all ambiguous in light of the same that Ms. Gore never actually became an employee, and that the employer could have used more precise words such as “applicant” and “application process”. The majority upheld the District Court ruling.

The most interesting twist in this case is that the First Circuit ruled that the Defendant had failed to assert a public policy argument that arbitration agreements are favored, and therefore refused to consider the public policy favoring arbitration agreements. The dissent argued that the majority should have considered and enforced federal policy, which must trump Maine’s contract law. The dissent’s argument is contrary to New Jersey case law and Federal law, which have consistently held that State law governs whether an agreement to arbitrate has been made. See, e.g. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, (1995); Quigley v. KPMG Peat Marwick, LLP, 330 N.J.Super. 252 (App. Div. 2000). Due to the dissent, it is likely that this case will be published, and that the Defendant will seek certiorari, so this may not be over yet.

It is ironic that both of these cases were lost because a party, in this case the defendant, waived its public policy arguments. The lesson is that when an issue regarding the waiver of statutory right is being litigated, public policy arguments should always be front and center.

Plaintiff’s counsel: Arthur J. Greif, Gilbert & Greif, P.A.

Defendants’ counsel: David A. Strock, and Philip Moss, Fisher & Phillips LLP

Judges: Lipez and Lynch (majority); Torruella (dissent)

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