Alleged pre-employment misrepresentations were within scope of employment agreement arbitration clause

The prospective employee in California was promised certain compensation and commissions if he joined the company in Illinois. When he joined, he signed an employment agreement calling for arbitration of disputes in New York. It was not a good marriage, and he was fired, with the employee claiming he was lied to and undercompensated and the employer claiming he had not performed. His lawsuit alleged pre-employment misrepresentations that induced him to take the job, but the employer argued that all such claims must go to arbitration. A federal District Court judge has agreed with the employer, dismissing the Illinois lawsuit and indicating that the parties should proceed to arbitration in New York.

The employee argued that the pre-employment promises were outside the scope of the arbitration agreement, and also that it would be prohibitively expensive to have to arbitrate in New York. Per the court, he argued that the “dispute has its origin in [the recruiter]'s misrepresentations, made prior to Plaintiff ever signing an arbitration agreement." The employer argued, conversely, that even if some of the claims arose prior to the arbitration agreement, those claims were nevertheless encompassed by the arbitration clause.

The employment agreement arbitration clause stated: “all employment-related disputes ... arising out of, relating to, or resulting from [the employee’s] employment with the company or the termination of [the employee’s] employment with the company, including any breach of this agreement, shall be subject to binding arbitration ..." According to the court decision, the arbitration provision also included a comprehensive list of arbitrable disputes, including "any statutory claims under local, state or federal law" and "any ... common law claims."

The federal court judge stated:

In determining the scope of an arbitration provision, courts apply state laws of contract interpretation... Here, the Agreement contains an expansive arbitration provision that covers "any and all controversies ... arising out of, relating to, or resulting from my employment with the company ..." The Agreement lists a number of covered disputes along with a catchall provision including "any statutory or common law claims." And there is no provision excluding any specific claims from arbitration. New York courts have explained that when an arbitration clause covers "any dispute" and does not exclude any claims from arbitration, it is an "all-inclusive provision" that presumptively covers the parties' disputes. (citations omitted)

Thus, with a broad-form arbitration clause, the employee must proceed with arbitration if he wants to pursue his claims, including those claims arising from pre-employment promises. Case law support for arbitration, particularly in the presence of broad-form clauses, continues. The case is Bahoor v. Varonis Sys., 2015 U.S. Dist. LEXIS 172028 (Dec. 28, 2015), available here (subscription required).