A successor employer may enforce an arbitration agreement an employee singed with the predecessor employer, according to a recent Hawaii district court decision.  In Southern Glazer’s Wine and Spirits, LLC v. Denyer, Chief United States District Judge Michael Seabright granted the employer’s motion to compel arbitration with respect to employee Janet Denyer’s wrongful termination claim.

Denyer was hired by Southern Wine & Spirits of America, Inc. (SWSA) in 2016.  Upon hire, Denyer signed a notice and mutual agreement to arbitrate claims.  The notice and agreement specified that the parties would arbitrate all claims arising out of Denyer’s employment and termination.  When Southern Glazers Wine and Spirits, LLC (SGWS) ended Denyer’s employment in April of 2017, she filed suit alleging whistleblower retaliation, violation of wage and hour law, hostile work environment, and more.  SGWS responded by filing a motion to compel arbitration, based upon the notice and mutual agreement to arbitration that Denyer had signed with SWSA.  Denyer opposed the motion for multiple reasons, including because the arbitration agreement was not an enforceable contract and it did not apply to SGWS because she had signed it with SWSA. 

The court considered and ultimately disagreed with Denyer’s arguments that the arbitration agreement was not enforceable.  In so doing, it reasoned:

• The arbitration agreement was valid because it existed in writing, expressed a clear intent to submit employment claims to arbitration, and contained bilateral consideration.
• Hawaii Supreme Court precedent establishes that non-signatory successors are entitled to enforce arbitration agreements signed by predecessor corporations whose liability they have assumed. The record showed that SGWS was a successor to SWSA after the two entities merged in 2016 and the arbitration agreement contained language stating that it specifically applied to SWSA’s successor organizations.
• The agreement was not unconscionable. The record showed that Denyer was provided with notice of the arbitration agreement and the opportunity to review it.  Denyer further argued that the agreement was unconscionable because she cannot afford to participate in arbitration.  The court disagreed, noting that the arbitration agreement only required her to pay $100 in administrative costs.  While Denyer argued that she would be required to travel to the mainland to participate in arbitration, the record showed that if the parties could not agree on the locale of the arbitration, the American Arbitration Association would determine the place of arbitration “having regard for the contentions of the parties and the circumstances of the arbitration.”