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Most commercial agreements are made online today, including contracts for services, materials and licensing. For plumbing professionals, these online agreements often include mandatory arbitration clauses, which require that any disputes arising from the agreement be resolved in arbitration rather than in a court of law. Plumbing engineers and contractors must understand the ramifications of mandatory arbitration in online contracts.
What is arbitration?
Arbitration is a method of binding dispute resolution, and it is purely a creature of contract; it allows parties to resolve their disputes outside of court and without the need for or expense of a jury. The parties’ dispute is heard by an arbitrator or panel of arbitrators (depending on the parties’ agreement), who makes a usually binding decision.
In other words, whatever the arbitrator decides is typically final, and the opportunities to appeal are usually limited (either as a matter of law or under their agreement). When dealing with online agreements, arbitration clauses often appear in digital or “clickwrap” agreements, and users agree to terms by simply clicking “I agree.”
Many companies use online arbitration agreements nowadays to save costs and avoid lengthy court disputes (including in the context of a class action or involving a jury). For plumbing professionals, this means that agreements they accept online through a click may require any legal issues to be resolved in arbitration. However, it is not always clear what rights plumbing professionals waive when clicking “I agree.”
In Marshall v. Georgetown Memorial Hospital, 112 F.4th 211 (4th Cir. 2024), a job applicant brought a putative class action lawsuit against a university-affiliated healthcare provider alleging, among other things, that a policy requiring new employees to pass a physical agility test discriminated against persons with disabilities in violation of the Americans with Disabilities Act.
The provider moved to compel arbitration, but the federal district court denied the motion. The U.S. Court of Appeals for the Fourth Circuit upheld the district court’s decision.
Online arbitration agreements
The appellate court examined whether the digital arbitration agreement was enforceable. The employee argued that she did not knowingly consent to an arbitration clause that was part of an online agreement. The court found that simply clicking through a webpage without clearly understanding the terms was not enough to create a binding contract.
Similarly, the “ARBITRATION NOTICE” heading atop the webpage did not put the employee on reasonable notice of the mandatory arbitration provision. The employee was not required to review the arbitration clause in a way that made it evident and enforceable. She did not have to go “on the hunt” for relevant contract terms.
If structured properly, the online agreement would have required the employee to click on a button only after she scrolled through the arbitration notice terms. Maybe it would have also included boldface print in a larger font. Simply embedding the clause at the end of a lengthy application without making applicants scroll or actively acknowledge the terms is insufficient.
Employers are advised to clarify arbitration terms, requiring applicants to affirmatively agree to them to avoid similar rulings against arbitration enforcement.
In Chilutti v. Uber Technologies, Inc., 300 A.3d 430 (Pa. Super. Ct. 2023), appeal granted, No. 257 EAL 2023, 2024 WL 3947922 (Pa. Aug. 27, 2024), the Superior Court of Pennsylvania found that a party seeking to enforce an online arbitration has a “stricter burden of proof” to overcome a party’s right to a jury trial. This case focused on the arbitrability of a dispute between a ride-share passenger and an Uber driver.
The Court of Common Pleas granted Uber’s motion to compel arbitration (embedded in its online agreement). In a 5-to-3 decision, the Superior Court of Pennsylvania, the state’s intermediate appellate court, reversed, finding a “lack of valid agreement to arbitrate” to overcome the constitutional right to a jury trial. On Aug. 27, 2024, the Supreme Court of Pennsylvania agreed to review the issue, including the standards needed to be shown for an effective waiver of a jury trial in favor of arbitration.
Takeaways
The Marshall and Chilutti cases demonstrate the need for clarity in digital contracts. Courts are becoming cautious with arbitration clauses not presented clearly (i.e., buried in fine print). Plumbing professionals can better protect their rights when using digital contracts by knowing what to look for and following best practices.
If a digital agreement does not clearly explain that arbitration is mandatory, it may not be enforceable. Contractors should carefully review their online agreements, especially concerning dispute resolution.
As a practical matter, the issue of online arbitration agreements and their enforceability is a bit of a moving target. To waive a jury trial in favor of arbitration, such a waiver must be a knowing one. A business cannot bury an arbitration clause in fine print in the middle of an electronic agreement and hope the customer comes across the relevant verbiage.
Instead, the notice of arbitration needs to be conspicuous, and a clickwrap agreement should be employed, thus requiring the customer to click on a spot to accept explicit terms after scrolling to the end of those terms. While this additional clicking is no guarantee that the customer will read every word of the arbitration clause, it may be enough to put the customer on actual, constructive and inquiry notice of mandatory arbitration and the waiver of its right to a jury trial.