The Michigan Court of Appeals waves a red flag for employers who use employment agreements by ruling that a trial court erred by granting defendant's motion for summary disposition and dismissing the plaintiff's discrimination claim against him under the Michigan Civil Rights Act (CRA) based on an arbitration agreement in plaintiff's employment contract. It was clear from the terms of the agreement the only parties to the contract were the Ennis Center and plaintiff.
The employment contract defined the Ennis Center as "the Agency," and provided if the employee had "any dispute with the Agency" the dispute would be submitted to arbitration. Although defendant signed the employment contract, the contract specified he did so "For the Agency." The contract language specifying he signed it "For the Agency" clearly indicated he signed the contract solely as an agent for the Ennis Center. Plaintiff's claim against defendant implicated his potential personal liability under the CRA, not the Ennis Center's potential vicarious liability for his alleged discriminatory conduct.
The court rejected defendant's argument that the clause specifying the "agreement shall be binding on the heirs and representatives of parties hereto" allowed him or any other person, as Ennis Center's agent, to compel arbitration in an individual capacity. The phrase did nothing more than state what the law might presume in the absence of express language to bind heirs and representatives of a contracting party. The phrase also did not make defendant an intended third-party beneficiary of any contractual promise under MCL 600.1405. The court declined to apply the broad construction given to an arbitration provision in a stock purchase agreement in Arnold for purposes of holding that corporate agents had a right to compel arbitration of claims brought against them in an individual capacity. The fact that an individual is a corporate agent does not reveal an intent to protect the individual through arbitration. Unlike the broad language in Arnold found to reflect a basic intent to provide for a single arbitral forum to resolve any disputes arising out of a stock purchase agreement, plaintiff and the Ennis Center did not agree to arbitrate any dispute arising out of the employment relationship. The arbitration provision was confined to disputes with "the Agency," which was defined as the Ennis Center. Although plaintiff's claims against defendant might be interwoven with her claims against the Ennis Center, because plaintiff and the Ennis Center did not agree to give the Ennis Center's agents the protection of the arbitration provision in the employment contract with respect to their own potential individual liability, the court held defendant could not compel arbitration.
This case is a reminder for all those employers who use employment agreements with arbitration clauses to protect individual corporate agents as well as the corporation. A suit that proceeds against individual corporate agents could manifest issues that might be preclusive against the corporate entity. The goal of limiting discovery and other costs associated with a lawsuit that arbitration is intended to accomplish are also frustrated in this situation.
Riley v. Ennis, Michigan Court of Appeals (unpublished)
