Hunton Employment & Labor Perspectives

In Bodine v. Cook's Pest Control Inc., No. 15-13233, 2016 WL 4056031 (11th Cir. July 29, 2016), the Eleventh Circuit held that a forced-arbitration agreement in an employment contract is enforceable, despite the fact that certain provisions of the arbitration agreement violated the Uniform Services Employment and Reemployment Rights Act (“USERRA”).

Rodney Bodine, a member of the U.S. Army Reserve, was part of the sales force at Cook’s Pest Control, Inc. (“Cook’s”) in Alabama. His employment contract with Cook’s contained an arbitration clause, which included provisions that 1) permitted the arbitrator to re-apportion costs and attorneys’ fees, and 2) set the statute of limitations for filing a claim under the agreement at six months. After being terminated, Mr. Bodine brought suit against Cook’s under the USERRA, 38 U.S.C. § 4301, and state law, alleging, inter alia, discrimination based on military service.

USERRA provides statutory protection to members of the military against discrimination by employers because of their military service. 38 U.S.C. § 4301(a)(3). It also contains a non-waiver provision, which provides that the chapter “supersedes any” contractual agreements that “reduces, limits, or eliminates in any manner any right of benefit provided by t[he] chapter.” § 4302(b). USERRA also states that there is no statute of limitations for bringing a claim under the Act, § 4327(b), and that no court costs or fees may be charged to a USERRA plaintiff, § 4323(h)(1). Mr. Bodine alleged that, because the statute of limitations and fee provision of the arbitration agreement conflicted with USERRA, the entire arbitration provision was void under USERRA’s non-waiver provision.

Cook’s moved to compel arbitration. Although it conceded that the two provisions Mr. Bodine complained about did indeed violated USERRA, Cook’s argued that the court could use the employment contract’s severability clause to excise the two invalid provisions while retaining and enforcing the remainder of the arbitration agreement, pursuant to the Federal Arbitration Act’s (“FAA”) “liberal policy favoring arbitration agreements.” The district court agreed and, under Alabama’s severability law, it struck the statute of limitations and fee provisions from the arbitration agreement. The court dismissed the suit without prejudice and ordered Mr. Bodine to submit his claims to arbitration.

Over a dissent by Judge Martin, a panel of the Eleventh Circuit affirmed the district court’s order and concluded that “USERRA’s non-waiver provision should not be read to automatically invalidate an entire agreement with USERRA-offending terms. Instead, the plain language of [USERRA] contemplates modification of an agreement by replacing USERRA-offending terms with those set forth by USERRA.” (Emphasis added.) The Court held that the “USERRA’s non-waiver provision does not conflict with the FAA: both statutes provide a mechanism for striking from an arbitration agreement a term in conflict with USERRA.”

Despite the Court’s holding, employers are wise to consider USERRA’s provisions when drafting employment contracts and arbitration agreements. In addition to the statute of limitations and fee provisions at issue in Bodine, USERRA contains provisions pertaining to jurisdiction, § 4323(b), and venue, § 4323(c). The Act also requires employers to “provide to persons entitled to rights and benefits under this chapter a notice of the rights, benefits, and obligations of such persons and such employers under this chapter.” § 4334(a).