Ties that bind 

Judge strikes down Town Pump’s arbitration requirement

A federal judge in Helena has dismissed a lawsuit filed by Town Pump Inc. against a former employee who had lodged a racial discrimination and retaliation complaint against the Butte-based company.

The case reflects an ongoing national debate about the practice of employers preventing workers from suing their companies over job-related discrimination, wrongful discharge and other legal claims, by forcing them to submit their grievances to an arbitrator. A similar case, Equal Employment Opportunity Commission (EEOC) vs. Waffle House Inc., is scheduled to be decided soon by the U.S. Supreme Court.

Court records show that Rhonda Phipps, a member of the Chippewa-Cree Tribe, started working at a Town Pump outlet in White Sulphur Springs in January. A month later, Phipps says, she was standing next to her supervisor, Debbie Sanford, when Sanford allegedly used the word “squaw” while talking with a customer.

Phipps, 42, says she reported the incident to a manager, who agreed that it was inappropriate because the word is offensive to many American Indians. Phipps then asked the manager to talk to Sanford and ask her to apologize. What allegedly happened next brought the matter to the Montana Human Rights Bureau and U.S. District Judge Sam Haddon, who said last week that he doesn’t believe the state’s anti-discrimination laws are preempted by the Federal Arbitration Act.

According to Phipps, Sanford responded to her with anger after the manager broached the “squaw” issue. Sanford denied making the remark, saying it was misunderstood when she told a friend in the store “to quit squawking” about not stocking a type of doughnuts he liked. She also refused to adequately apologize, Phipps says.

Following the confrontation, Phipps says Sanford and other Town Pump employees improperly reprimanded her for work duties she hadn’t been trained for, tried to sabotage her work and reduce her hours. Moreover, other company employees also reported that Sanford and other supervisors repeatedly discussed how to get rid of Phipps after the incident.

Phipps quit her job a few months later and filed a complaint with the Human Rights Bureau. The bureau later ruled that supervisors had retaliated against Phipps, but that no racial discrimination had taken place. Nonetheless, the bureau’s report states that another supervisor at the White Sulphur Springs store, Amanda Tyler, testified that Sanford and others “talked bad” about Phipps after she complained to the store’s manager, and that another Indian woman who applied for work at the outlet was turned down because supervisors didn’t want another “squaw” working at the business.

According to the report, Tyler said that Sanford commonly made derogatory remarks about customers who “were of other national origins or who were religious,” and that Sanford was particularly disdainful of African Americans. Sanford denies the allegations and contends that she apologized to Phipps for the “misunderstanding.”

Meanwhile, last June Town Pump attorney Jim Goetz of Bozeman filed a federal lawsuit against Phipps, Human Rights Bureau Director Kathleen Helland, and Francisco Flores, the Denver regional director of the EEOC. The suit alleges that the state and federal governments cannot consider Phipps’ claims because she had previously signed an employment agreement that mandates binding arbitration for resolving any disputes she may have with the company.

Eula Compton, a Town Pump staff attorney, says the arbitration policy was adopted in October 2000. All potential employees of Town Pump since that time have been required to sign this agreement, included in the company’s job application. Employees already working for the firm when the policy went into effect were given the option of signing, she says. Town Pump, owned by the Thomas Kenneally family, has more than 1,500 full-time employees at dozens of gas stations, convenience stores, casinos and motels across Montana.

“The Kenneallys are frugal,” Compton says. “It’s well-known. The arbitration policy is just a cost issue. Discrimination and wrongful discharge suits are costly. With arbitration, you can just get it done quickly and it’s less costly.”

But detractors contend that arbitration agreements of this kind unfairly limit workers’ rights and prevent them from pursuing legitimate claims against unsavory employment practices. The policies, they say, are often aimed at minorities and other low-income workers who cannot afford to take on powerful corporations. In addition, they contend, many workers don’t fully understand the consequences of waiving their legal rights.

“Nationally, it’s becoming a disgrace of our country,” says Gene Fenderson, executive secretary of the Montana Progressive Labor Caucus. “They end up costing [workers] thousands and thousands of dollars to go through the process.”

Fenderson says he equates this new wave of arbitration agreements to the old “yellow dog” contracts of the early 1900s, where companies forced citizens to sign anti-union agreements before they were hired.

“Now we’re kind of going through the same thing with these binding arbitration agreements,” Fenderson says. “They’re just a disgrace.”

But Compton says she believes workers still have adequate protections, and they are cautioned in the company’s application about what is at stake.

“Our arbitration process covers all the remedies available in state and federal court,” Compton adds, though neglecting to mention that typically binding arbitration decisions cannot be appealed.

While dismissing the company’s case last week for procedural reasons, Haddon added that he believes Town Pump’s employment agreements are contracts of “adhesion,” meaning they are potentially improper because the company is exerting undue power over its employees. Compton, however, disagrees that the contracts are unfair.

“Any employment contract is a contract of adhesion,” she says. “Employees don’t get to set their hours or their pay.”

Compton says a decision has not yet been made whether to appeal Haddon’s decision. It is unknown at this point what effect, if any, the ruling will have on other Montana companies that require employees to waive their rights to litigate.

“We’re not against all arbitration,” says Andy Huff, who represents Phipps with attorney Tim Kelly. “But arbitration always has to be fair. I think that’s what is at the heart of this case.”

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