Hepler Broom, LLC

Consider It (Not) A Deal: Whether offering “continued” or “new” employment, an offer for “at-will” employment is insufficient consideration to form a contract

February 3, 2015

The Missouri Court of Appeals recently rendered unenforceable employment contracts seeking to bind “at-will” employees unless there is consideration from the employer beyond an offer of employment. In Kathryn Jimenez v. Cintas Corporation, et al., No. ED101015 & ED1011241 (Mo. App. E.D. Jan. 13 2015), the Eastern District held that an offer for at-will employment, regardless of whether the offer from the employer was for new employment or continued employment, does not constitute sufficient consideration to form a binding employment contract.

Kathryn Jimenez began working at Cintas in 2011 and continued working there for approximately six months before being terminated. Id. at 2. After termination, Jimenez filed suit against Cintas and two managers alleging discrimination and harassment. Id. Defendants then sought to enforce the arbitration provision of an employment contract Jimenez allegedly signed at the outset of her employment. Id.

The trial court considered Defendants’ motion to compel arbitration and held that the employment agreement was insufficient to form a contract for want of consideration. Id. at 4. The trial court held that, “there cannot be sufficient consideration given in an employment contract with an at-will employee such as to consummate a binding contract to arbitrate any dispute between the parties,” and further that the agreement was unconscionable. Id.

Defendants appealed claiming that sufficient consideration included 1) Cintas’s offer of new or future at-will employment; and 2) the parties’ mutual promises to arbitrate. Id. at 5. Conversely, Jimenez argued that the employment agreement was devoid of consideration because it was “at-will,” and Defendants’ promise to arbitrate was not mutually binding. Id. The Court of Appeals agreed.

The Court initially noted that “parties will be compelled to arbitrate their claims only if the arbitration agreement satisfies the essential elements of a valid contract.” Id. (citing Marzette v. Anheuser-Busch, Ind., 371 S.W.3d 49, 52 (Mo. App. E.D. 2012)). Dismissing Defendants’ arguments that “new” or “future” employment, as opposed to “continued” employment, would be adequate consideration, the Court held that, “terms and conditions of at-will employment are unilaterally imposed on employees, so they are not enforceable at law as contractual duties.” Id. at 7. The Court found no distinction between “continued,” “new,” or “future” employment. Id.

Seeking to find other valid consideration, Defendants argued that the agreement was a bilateral contract, and the agreement’s mutual promises to arbitrate constituted valid consideration from both parties. Id. at 9. Jimenez demurred, claiming there was no mutuality of obligation. Rather, Jimenez argued the agreement exempted claims most likely to be brought by the employer while she remained bound to arbitrate claims, such as discrimination, that an employee would most likely make. Id. at 9.

The Eastern District did note the agreement required both parties to arbitrate certain claims, but also found that it exempted from arbitration claims such as workers compensation and unemployment claims. Id. at 11. Importantly, the agreement also exempted claims for declaratory judgment or injunctive relief stating:

Employer may apply to any court of competent jurisdiction for a temporary restraining order, preliminary injunction or other injunctive relief to enforce Employee’s compliance with the obligations, acknowledgments and covenants in this Section 4. Employer may also include as part of such injunction action any claims for injunctive relief under any applicable law arising from the same facts or circumstances as any threatened or actual violation of Employee’s obligations, acknowledgments and covenants in this Section 4.

The Court took judicial notice of Missouri’s case law which confirms that the majority of cases brought by employers against employees included injunctive or declaratory relief related to non-compete clauses. Id. at 12. Conversely, employees most often make claims related to those actions for which the contract requires arbitration, such as discrimination claims. Thus, Jimenez was required to arbitrate her claims while Defendants could seek redress in a court of law. Id. at 13. Further, the above clause allows Defendants to file “claims for injunctive relief under any applicable law arising from the same acts or circumstances as any threatened or actual violation of Employee’s obligations.” Id. (emphasis in original). Writing for the Court, Judge Van Amburg found this expansive language allowed Defendants to litigate at their discretion while Jimenez was forced to arbitrate. Id. The Court held that the parties were therefore not mutually obligated, the agreement was not a contract, and the arbitration provision was unenforceable.

Writing in concurrence, Judge Odenwald agreed only that the arbitration provision of the employment agreement lacked mutuality of obligation and therefore also lacked sufficient consideration. However, he declined to agree with the majority that an offer for continued employment is indistinguishable from an initial promise of at-will employment. Rather, Judge Odenwald considered this ruling an expansion of Missouri caselaw which, he opined, has never held that an offer for new at-will employment was insufficient consideration to form a binding contract.

Regardless of whether this is an expansion or a clarification of existing Missouri law, employers seeking to bind new at-will employees to employment contracts would be wise to include consideration beyond the offer of employment.