Adhesion Contracts and Arbitration Clauses: Are They Enforceable?
In a recently published Michigan Court of Appeals opinion, the court determined that an arbitration provision in a Best Buy employment contract was reasonable and not unconscionable. In this case, Best Buy required all potential employees to sign an employment contract which contained an arbitration provision. Applicants were required to review and affirmatively agree to the arbitration policy before submitting their application. The Plaintiff challenged the enforceability of the arbitration provision on the arguments that the agreement (1) lacked a valid offer and acceptance; (2) was not explained to her by Defendant Best Buy; (3) lacked valid consideration, and (4) violated public policy.
The Court acknowledged that the contract between Plaintiff and Best Buy was an adhesion contract. The agreement was prepared by Defendant Best Buy. The two parties did not have equal bargaining power. However, the Court noted employers and businesses frequently use form contracts with no negotiation to engage in day-to-day commerce across the state and nation. As a result, in Michigan an agreement is not an unlawful adhesion contract if a court determines that the terms in dispute are reasonable terms. The Court then turned to whether the arbitration provision in the contract was reasonable.
The Court first acknowledged that the Michigan Legislature and Supreme Court have long approved arbitration as a legitimate, efficient alternative to resolving disputes. The Court determined the provision was reasonable because it applied equally to both parties and it did not substantially change what the employer or employee would be entitled to under the law. The Court emphasized Michigan’s strong public policy favoring arbitration and clarified that unequal bargaining power alone does not render an employment arbitration agreement unenforceable.
Read entire case at:
Johnson v. Best Buy Company, Inc.
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Attorney Peter A. Angelas represents defendants in civil liability litigation across Michigan. His practice areas include insurance defense litigation, premises liability, motor carrier (trucking) defense, corporate and commercial litigation, construction defect litigation, auto negligence, insurance coverage disputes, emergency casualty response services, alternative dispute resolution, subrogation claims, workers’ compensation, employment law, and liquor liability.
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