Age Discrimination, Arbitration & Employment Law: Court Declines to Order Arbitration of Age Discrimination Claims in Co-Employment Situation

To attempt to avoid potential liabilities arising from the employer-employee relationship there is a trend in certain large companies to hire employees through outsourcing firms rather than as direct employees. In a recent case, MacDonald v. Unisys Corp. 2013 U.S. Dist. LEXIS 82361 (E. D. Pa. June 12, 2013)(Brody, J.), a direct employer’s attempt to rely on an outsourcing firm’s arbitration clause to compel former employees to arbitrate their claims, rather than litigate the claims in court was rejected. In MacDonald, the Plaintiffs filed age discrimination case against their former employer Unisys which moved to compel arbitration. The Plaintiffs were originally direct employees of Unisys. In 2010, Unisys entered into an agreement with Hexaware, an IT outsourcing services corporation to outsource a portion of its internal IT function to Hexaware. Unisys terminated the employment of the Plaintiffs who were immediately offered employment with Hexaware and advised that if they did not accept employment with Hexaware, they would be considered “to have voluntarily resigned.” and not be eligible for severance or state unemployment benefits. Not every employee in the internal IT department was terminated. Those selected by Unisys for termination were “predominantly older, more senior workers”; whereas those retained by Unisys were “younger, less-experienced employees.” The former Unisys employees, who were working for Hexaware, continued to report to the same Unisys managers at the same office locations and sit at their same workstations. These employees continued to use their Unisys email addresses, phone numbers, sign-on names, passwords, ID badges, and keys.

Less than six months to a year after beginning their employment with Hexaware, Unisys directed Hexaware to terminate the Plaintiffs. The Plaintiffs filed a lawsuit alleging that their termination by Unisys, immediate hiring by Hexaware and eventual termination constituted a ‘sham transfer” orchestrated by Unisys in an effort to eliminate older workers from its workforce. In MacDonald, Unisys filed a motion to dismiss the lawsuit and compel arbitration of the Plaintiffs’ claims based on Employment Agreements entered into between Hexaware and the Plaintiffs which contain an arbitration clause. The Court denied Unisys’ motion to compel arbitration because Unisys was not a signatory to an arbitration agreement with regard to the actions which occurred when Unisys terminated the employment of the Plaintiffs. The Court also found that more discovery was needed before ruling on issues regarding the enforceability of the arbitration agreement as it relates to Unisys directing Hexaware to terminate the employment of the Plaintiffs after they became employees of Hexaware.

For more information on age discrimination and Abramson Employment Law see http://www.job-discrimination.com/lawyer-attorney-1126515.html.

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