Employees of Nationwide Motor Sales Corp. in Timonium, Maryland, will be able to sue the federal court against the company and its owners and not seek an arbitrator, said the 4th U.S. District Court of Appeals ruled.
The 3-0 decision on April 25 was made after the staff of Nationwide, which is engaged in retail new and used vehicles, filed a lawsuit in the district court, alleging “fraudulent payment practices that reduced commissions from sales and final checks”. In response, Nationwide filed an application for compulsory arbitration in accordance with its Employee Handbook, which contains an arbitration agreement that requires that all disputes between employees and the company be resolved through an arbitrator.
In the opinion, the staff argued that the arbitration agreement was invalid because of the paragraph on changes to the Handbook, which states that Nationwide “reserves the right to change, revoke or change the policies, procedures and benefits of the Handbook”. Maryland law states that arbitration clauses are void if the employer has the ability to “change, modify, change or revoke the arbitration policy … at any time with or without notice.”
Nationwide argued that the amendment clause did not apply to the arbitration agreement, stating that it applied only to procedures, policies and benefits.
The district court sided with the staff.
“The best reading of the Receipt is that the Company’s” personnel policies, procedures and preferences “cover all sections of the Handbook, including those” specifically “confirmed in the receipt, such as the Arbitration Agreement,” the statement said. “Because the amendment clause gives a national the right to change or repeal this policy, procedures and benefits without prior notice, the Arbitration Agreement is illusory under Maryland law.”
Plaintiffs’ attorney, Brian Markowitz, wrote in an email to Automotive news that the 4th District upholds Maryland law.
“This important decision makes the refusal and the agreement separate, so I believe that the fourth district has published the decision,” Markovic wrote. “I think, speaking to non-professionals, the Court has recognized that the drafters of arbitration agreements should in fact undertake arbitration obligations.
Attorney General William Murphy declined to comment.
The lawsuit of the employees can now be transferred to the federal court.