Twitter, Inc. terminated almost 80% of its labor force beginning in late 2022,[1] after which it merged with X Corp., which became the successor in interest.[2] Twitter has since rebranded itself as “X,” much to the surprise and confusion of users and public alike.[3] Prior to the rebrand, Fabien Ho Ching Ma, one of the terminated employees, filed a petition to compel Twitter and X Corp. to arbitrate the terminated employees’ claims and pay the arbitration fees.[4]

Mr. Ma filed the petition in the United States District Court in San Francisco, although he seeks arbitration in New York.[5] In his petition, he alleged he signed a contract with Twitter requiring the parties to arbitrate employment claims with Judicial Arbitration and Mediation Services, also known as JAMS, rather than before a judge and jury.[6]  The contract was signed by Mr. Ma and Twitter’s then-Chief People and Diversity Officer.[7]

The petition alleges the contract requires the parties to use JAMS’ arbitration rules as they existed at the time of the contract.[8]  Mr. Ma filed the petition not only on his behalf, but also for unidentified other terminated employees similarly situated.[9]  The petition references numerous other cases filed in various states by the law firm representing Mr. Ma, and a smaller number of cases filed by a second law firm.[10]

JAMS’ website contains a list of Employment Arbitration Rules & Procedures and a separate list of Employment Arbitration Minimum Standards of Procedural Fairness.[11]  The list of Minimum Standards includes a provision requiring the employer to pay all arbitration fees, except for an initial case management fee of $400.[12]

In contrast, the contract between Mr. Ma and Twitter stated unless the company is required by law to pay all the arbitration fees, the parties will apportion the arbitration fees “in accordance with applicable law.”[13] X Corp. informed JAMS that in any state where fee apportionment is permitted, the company will not abide by JAMS’ Minimum Standard, which shifts the fees to the employer, because the standard “conflict[s] with the express, unambiguous and controlling terms of the applicable dispute resolution agreements between the parties.”[14]

X Corp. listed numerous arbitrations filed in Colorado, Florida, Georgia, Illinois, Massachusetts, Michigan, Minnesota, Missouri, New York, Pennsylvania, Texas, Washington, and Washington DC, in which X Corp. will not agree to pay the employees’ proportionate share of arbitration fees.[15]  X Corp.’s position did not affect arbitration pending in California because California law states an employer which requires an employee to litigate in arbitration must pay the arbitration fees in employment disputes.[16] Twitter’s contract affirmed it would pay the fees when required by state law. [17]

Arbitrations provide “a speedy and relatively inexpensive means of resolving disputes and eases court congestion.”[18]  Because the parties agreed the arbitration is governed by the Federal Arbitration Act, the federal policy favoring arbitrations must be enforced and “ambiguities as to the scope of the arbitration clause itself [are] resolved in favor of arbitration.”[19]

However, JAMS informed the parties if X Corp. “declines to proceed under the Minimum Standards, JAMS will decline to administer the arbitration.”[20] JAMS’ position delays the arbitration, at least until courts decide whether JAMS’ standard of shifting fees to the employer is binding on X Corp. Because the parties specifically bargained to arbitrate with JAMS, and JAMS has declined to arbitrate unless the parties proceed under its Minimum Standards, the arbitration cannot go forward with JAMS in those states. The contract is silent on whether the parties can use another arbitration service because it specifices the use of JAMS.[21]

Analysis

The federal Worker Adjustment and Retraining Notification (WARN) Act requires a company with 100 or more employees to give workers at least 60 days’ notice before termination or a mass layoff of certain number of employees that is not due to a plant shutdown.[22] The purpose of the Act is to provide protection to workers so they may seek and obtain alternative jobs and/or training.[23] Some states, such Illinois and New York, have their own local statutes which provide more protection to employees.[24] When Twitter, prior to its merger with X Corp., terminated thousands of employees and almost 80% of its labor force,[25] it implicated the federal WARN Act. However, the petition implicates any employment arbitration in which JAMS or other providers require the employer to pay nearly all the arbitration fees, even when the state law does not. [26]

By refusing to pay the employees’ arbitration fees in those states where local law does not require the employer to pay all fees, X Corp. has made arbitration more expensive for the employees, in addition to the law firm which has filed hundreds of demands for arbitration. While X Corp. has not yet responded to the petition, it is expected to argue that, under the FAA, the contract must be enforced according to its terms,[27] which expressly stated the parties will apportion the arbitration fees, unless state law shifted the fees to the employer.[28]

Moreover, if not for JAMS’ own standards in employment cases, the arbitrations affected by the petition would be subject to fee sharing. X Corp. may also argue that the Dispute Resolution Agreement adopted JAMS’ “Employment Arbitration Rules and Procedures,” not JAMS’ separate Minimum Standards. Mr. Ma has argued that JAMS’ Minimum Standards are an integral and published part of its rules and that the Dispute Resolution Agreement required the application of all rules.[29] 

It remains to be seen how the federal court will enforce the arbitration contract which conflicts with JAMS’ own standards on shifting fees to the employer. The court may find that, because the contract expressly states that the parties will follow state law on arbitration fees, the parties rejected JAMS’ standards which shifted fees to the employer. In contrast, the court may find that JAMS’ Minimum Standards are an integral part of its rules, and the parties agreed to JAMS’ rules. The court may also find in states where the law permits fee sharing but does not prohibit shifting fees to the employer, JAMS Minimum Standard shifting the fees to the employer is consistent with state law and therefore was accepted by the parties.

Takeaways

Employers should see this as a reminder that clarity is essential in employment contracts. In addition, employer should be cognizant of what they agree to when they decide to arbitrate with JAMS. When purchasing a pre-existing business, it may be more difficult to ascertain the legal ramifications of employment contracts and arbitration clauses, but preemptive review by an attorney can help employers avoid costly and time-consuing litigation against hundreds of displaced plaintiffs in the event of a mass layoff.

Keep Reading

Cannabis Workers Allege Quota to Trim 4 Pounds a Day Violates the California Labor Code The Ninth Circuit Reminds Us: Every Word Matters NO WAY, PRO SE! The Consequences of Abusing the Judicial System as a Pro Se Litigant in Colorado Victim of Financial Mismanagement or Unlawful Retaliation? New Jersey City University Program Founder Claims School Retaliated After Reporting Alleged Sexual Harassment “Real Housewives” Gets a Reality Check Missing a Chapter: Insufficiency of Expert Deposition Testimony in Medical Malpractice Litigation Crash Course: Why Summary Judgment Misses the Mark in Illinois Multi-Cause Limousine Crash Collision Bitter Truths: Lead, Cadmium, and Defective Pleadings in California Chocolate Class Action The Law of Unintended Consequences: Including Insurance Brokers in Litigation Strategy Communication May Waive the Attorney-Client Privilege

Sources

[1] (Michelle Toh and Juliana Liu, Elon Musk says he’s cut about 80% of Twitter’s staff, CNN BUSINESS (April 12, 2023, 10:22 AM EDT), https://www.cnn.com/2023/04/12/tech/elon-musk-bbc-interview-twitter-intl-hnk/index.html#)

[2] (Derek Saul, Twitter Tells Corporate Partners It’s Now X Corp. Amid Switch to ‘Everything App,’ FORBES (April 18, 2023, 2:35 PM EDT), https://www.forbes.com/sites/dereksaul/2023/04/18/twitter-tells-corporate-partners-its-now-x-corp-amid-switch-to-everything-app/?sh=718c73b11b35)

[3] https://www.theatlantic.com/technology/archive/2023/07/twitter-x-rebrand-juvenile-internet-style/674875/

[4] (Brief for Petitioner at 4 – Exhibit “C,” Ma v. Twitter (N.D. Cal. 2023) No. 3:23-cv-3301.)

[5] Ibid.

[6] Ibid.

[7] (Brief for Petitioner at Exhibit “A,” Ma v. Twitter, (N.D. Cal. 2023) No. 3:23-cv-3301.)

[8] Ibid.

[9] Ibid.

[10] (Michelle Toh and Juliana Liu, Elon Musk says he’s cut about 80% of Twitter’s staff, CNN BUSINESS (April 12, 2023, 10:22 AM EDT), https://www.cnn.com/2023/04/12/tech/elon-musk-bbc-interview-twitter-intl-hnk/index.html#)

[11] (Employment Rules & Procedures JAMS Employment Mediation, Arbitration and ADR Services, JAMS, https://www.jamsadr.com/rules-employment (last visited July 22, 2023.))

[12] (Standard No. 6: Costs and Location Must Not Preclude Access to Arbitration, JAMS (July 15, 2009), https://www.jamsadr.com/files/Uploads/Documents/JAMS-Rules/JAMS_Employment_Min_Stds-2009.pdf)

[13] (Brief for Petitioner at 3, section 6, Exhibit “A” “Paying for the Arbitration,” Ma v. Twitter (N.D. Cal. 2023) No. 3:23-cv-3301.)

[14] (Brief for Petitioner at Exhibit “E,” Ma v. Twitter (N.D. Cal. 2023) No. 3:23-cv-3301.)

[15] Ibid.

[16] (Armendariz v. Found. Health Psychcare Servs. Inc (2000) 24 Cal.4th 83.)

[17] (Brief for Petitioner at 3, section 6, Exhibit “A” “Paying for the Arbitration,” Ma v. Twitter (N.D. Cal. 2023) No. 3:23-cv-3301.)

[18] (Pillar Project AG v. Payward Ventures, Inc. (Sept. 1, 2021) (review denied) 64 Cal.App.3d 671, 681.)

[19] Ibid.; (Mastrobuono v. Shearson Lehman Hutton, Inc. (1995) 514 U.S. 52, 62.)

[20] (Brief for Petitioner at Exhibit “D,” Ma v. Twitter (N.D. Cal. 2023) No. 3:23-cv-3301.)

[21] Ibid.

[22] (29 US.C. §§ 2101-2102.); (Czyzewski v. Jevic Holding Corp. (2017) 580 U.S. 451, 459.)

[23] (20 C.F.R. § 639.1.)

[24] (Layoff Notice Laws (WARN), EMPLOYMENT LAW HANDBOOK, https://www.employmentlawhandbook.com/employment-and-labor-laws/topics/layoff-notice-laws/ (last visited July 22, 2023.))

[25] (Michelle Toh and Juliana Liu, Elon Musk says he’s cut about 80% of Twitter’s staff, CNN BUSINESS (April 12, 2023, 10:22 AM EDT), https://www.cnn.com/2023/04/12/tech/elon-musk-bbc-interview-twitter-intl-hnk/index.html#)

[26] (Brief for Petitioner at 3, section 6, Exhibit “A” “Paying for the Arbitration,” Ma v. Twitter (N.D. Cal. 2023) No. 3:23-cv-3301.)

[27] (Volt Info. Scis., Inc. v. Bd. Of Trustees of Leland Stanford Junior Univ. (1989) 489 U.S. 468, 479.)

[28] (Brief for Petitioner at 3, section 6, Exhibit “A,” “Paying for the Arbitration,” Ma v. Twitter (N.D. Cal. 2023) No. 3:23-cv-3301.)

[29] (See Brief for Petitioner, Ma v. Twitter (N.D. Cal. 2023) No. 3:23-cv-3301.)