A senior living provider’s employee arbitration agreement is “unenforceable” because the company reserved the right to unilaterally alter the policy without advance notice, a court has ruled.
The decision advances a former manager’s lawsuit against Silverado that alleges she was fired after she complained about unpaid wages.
The US District Court for the Southern District of Texas ruled Wednesday against the Irvine, CA-based memory care provider’s arbitration policy, calling it “illusory and unenforceable” under Texas law because the company reserved the right to unilaterally alter the policy without advance notice.
Sabra Egbert, a former manager, filed a Fair Labor Standards Act lawsuit in November, saying that Silverado terminated her employment in retaliation for her complaining about unpaid regular wages and overtime pay. Egbert said that the organization required managers to work on-call for one-week periods every four to six weeks to address after-hours issues. Egbert said she was not paid for the after-hours work.
Silverado contended that Egbert was compelled to settle the matter through arbitration because she accepted the terms of the company’s mutual arbitration dispute resolution policy by signing an acknowledgement form in the organization’s employee handbook.
The court sided with Egbert, however, finding that language in the handbook stating that Silverado “may change, rescind, or add to any policies or practices described in the handbook” at its discretion at any time rendered the arbitration policy unenforceable.
In Texas, an arbitration clause is considered illusory if it can be retroactively modified by one party that retains the power to end the agreement.
Silverado argued that its arbitration policy fell within the “unless stated otherwise” exception to the handbook’s default rule that policy changes are effective upon notice to employees. But the court found that, as far as the arbitration policy was concerned, no such exception appears in the handbook, the arbitration policy or the acknowledgement form.
Silverado had not replied to a request for comment from McKnight’s Senior Living as of the production deadline.
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