The employees of the Nationwide Motor Sales Corp. will be in Timonium, Md. , able to sue the company and its owners in federal court and not seek an arbitrator, the 4th U.S. Court of Appeals ruled.
The 3-0 decision came on April 25 after employees at Nationwide, which sells new and used cars, filed a lawsuit in district court alleging “fraudulent payment practices that lowered employee sales commissions and final salaries.” Nationally, in response, a lawsuit was filed to compel arbitration under its employee handbook, which contains an arbitration agreement that requires all disputes between employees and the company to be settled using an arbitrator.
According to the opinion, employees claimed that the arbitration agreement was invalid due to an amendment clause in the handbook that states that Nationwide “reserves the right to change, cancel or amend the policies, procedures, and benefits of the Handbook.” Maryland law states that arbitration clauses are invalid if the employer has the ability to “change, modify, amend or cancel the arbitration policy…at any time with or without notice.”
Nationwide claimed that the amendment clause does not apply to the arbitration agreement, saying that it applies only to procedures, policies and benefits.
The Circuit Court sided with the staff.
“A better read of the receipt is that ’employee policies, procedures, and company benefits’ include all sections of the manual, including those ‘particularly’ recognized in the receipt such as the arbitration agreement,” the opinion states. “Because the amendment clause gives Nationwide the right to change or cancel those policies, procedures, and benefits without notice, the arbitration agreement is fictitious under Maryland law.”
Plaintiffs’ attorney Brian Markowitz wrote in an email to Car News That the Fourth Circuit supports Maryland law.
“What makes this such an important decision is that the waiver and the agreement are separate, which is why I think the Fourth Circuit published the decision,” Markowitz wrote. “I think that on layman’s terms, the court was aware that the drafters of arbitration agreements had to actually abide by the arbitration. Framers can’t get both ways by waiting to see if the court or arbitration works better.”
National attorney William Murphy declined to comment.
The employees’ lawsuit can now be taken to Federal Court.