Pet Food Company Can’t Force Arbitration of Temp’s Bias Claims

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By Kevin McGowan

A Wisconsin pet food company can’t force a temporary employee to arbitrate her sexual harassment and retaliation claims based on an agreement she signed with the staffing agency that placed her.

Fromm Family Foods argued Anne Scheurer must submit her federal civil rights claims to arbitration because her contract with Remedy Intelligent Staffing called for “final and binding arbitration” of employment disputes.

But the U.S. Court of Appeals for the Seventh Circuit July 17 affirmed that under state contract law, no agreement to arbitrate between Scheurer and Fromm existed even though the company may be her employer under Title VII of the 1964 Civil Rights Act ( Scheurer v. Fromm Family Foods LLC , 2017 BL 245585, 7th Cir., No. 16-3327, 7/17/17 ).

The case results from an intersection between two modern workplace trends. Many companies are turning to temporary and other contingent workers to staff their operations. More employers also require workers to sign arbitration agreements intended to keep their employment disputes out of court and away from juries.

The Seventh Circuit’s ruling is “an important decision” for temporary workers because it foils a company’s effort to piggyback on the worker’s arbitration agreement with an employment agency, said William Sulton, a lawyer with Peterson Johnson & Murray SC in Milwaukee, who represented Scheurer.

Attorneys for Fromm didn’t respond to Bloomberg BNA’s request for comment.

No Reasonable Reliance

The appeals court said state contract law determines if an arbitration agreement exists. It said Fromm couldn’t prove under an “equitable estoppel” theory that it reasonably relied on Scheurer’s arbitration pact with the staffing agency in deciding to employ her.

Fromm didn’t know about the arbitration agreement until discovery in Scheurer’s Title VII case, the court pointed out. It therefore lacks evidence to support enforcement based on a reasonable reliance theory, Judge David Hamilton wrote in an opinion joined by Judges Diana Sykes and Michael Kanne.

A staffing agency like Remedy has distinct arrangements with each customer, Sulton told Bloomberg BNA July 18. In this case, Remedy handled payroll only when Fromm used temporary workers such as Scheurer and effectively acted as their employer, Sulton said.

Temporary workers in areas with few large employers are “applying to the job site” and hoping the company eventually offers them a full-time, permanent position, Sulton said.

Title VII Employer Status

Scheurer said her immediate supervisor at Fromm sexually harassed her. She complained to company management, but Fromm executives didn’t effectively address her complaint and instead “fired” her by asking Remedy to reassign her, she alleged.

Scheurer sued Fromm because it was the only “bad actor” in the case, Sulton said. There’s also “a single recovery” under Title VII, meaning Scheurer wouldn’t gain any more damages by suing both the company and staffing firm, he said.

Fromm’s argument that it isn’t Scheurer’s employer under Title VII is “disingenuous,” if not “frivolous,” Sulton said.

The case now returns to district court for additional proceedings. Sulton said he anticipates filing a motion arguing the court can find Fromm liable under Title VII without the need for a trial.

Michael Best & Friedrich LLP represented Fromm.

To contact the reporter on this story: Kevin McGowan in Washington at kmcgowan@bna.com

To contact the editors responsible for this story: Peggy Aulino at maulino@bna.com; Terence Hyland at thyland@bna.com; Chris Opfer at copfer@bna.com

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