Employees have sometimes tried to apply a pair of Michigan criminal laws against employers that include arbitration agreements in employment applications. Now a federal court has declared that those criminal statutes don’t apply. You don’t need to fear that making an employee sign the application will subject you to criminal penalties or imprisonment.
Recent case: When Connie Hutchinson sued her former employer for reverse racial discrimination, the company demanded the case be sent to arbitration. When Hutchinson had been hired, she had initialed an arbitration agreement included in the job application.
Hutchinson argued that Michigan’s Penal Code made it illegal for an employer to “demand or receive directly or indirectly from any person … consideration … as a condition of employment or hiring….” Michigan’s Wage andAct has an identical provision. Hutchinson argued that giving up the right to sue was a demand for consideration.
But the court said a later law specifically allowed employers to obtain “a reasonable noncompete agreement” from employees and said that law applied to arbitration clauses, too. (Hutchinson v. Earl Scheib, No. 07-10595, ED MI, 2007)
Final note: Now is a good time to review your employment applications. Make sure employees initial or sign any arbitration agreement. Otherwise. it won’t be a valid contract. Then, check that the application also explains that all other aspects of employment are at-will, and not contractual. It’s best to have counsel review the application.