An employee handbook/arbitration agreement issue that needs fixing -- fast

On Jan. 25, the 5th U.S. Circuit Court of Appeals struck down 24 Hour Fitness’ arbitration policy in John Carey, Individually and On Behalf of Other Employees Similarly Situated v. 24 Hour Fitness, USA Inc. The court laid it out: A former employee sued, alleging violation of the Fair Labor Standards Act and arguing he and other employees should have been paid overtime. The case needed to go to arbitration, claimed 24 Hour Fitness. But the court refused, and the 5th Circuit agreed. Why? The arbitration agreement was contained in the employee handbook, which stated that 24 Hour Fitness "has the right to revise, delete, and add to the employee handbook." The court said this meant that the company's promise to arbitrate was illusory. Under the handbook’s terms, the company could demand arbitration from an employee, pull an abracadabra and essentially say, "Oops! We are revising the policy. There is no more arbitration agreement!" Like a famous magician used to say, "It's magic." The irony is that 24 Hour Fitness would be highly unlikely to do so, because employers generally prefer arbitration. After all, it was seeking arbitration in this very case. But here intent was irrelevant; all that mattered was the handbook language. There are lots of arbitration agreements floating around Texas with this very same infirmity. Employers need to fix them — pronto.