Executive Summary: The Fifth Circuit
has issued a decision which may affect Texas employers who utilize
employment arbitration agreements. In Nelson v. Watch House
Int'l, L.L.C., No. 15-10531 (5th Cir. Mar. 2, 2016), the
court found an employment arbitration agreement unenforceable where
the "savings clause" did not expressly require
advance notice to employees of amendments and/or
termination of the arbitration agreement.
Background
Federal courts apply ordinary state-law contract principles in
determining whether agreements to arbitrate are valid. Texas law
has long held that arbitration clauses are illusory –
rendering them unenforceable – if one party can avoid
arbitration by unilaterally amending the provision or terminating
the agreement altogether. The Texas Supreme Court carved out an
exception, however, in In re Halliburton Co., 80 S.W.3d
566 (Tex. 2002), in which it found an arbitration clause was not
illusory because the agreement provided that
