A Georgia employer was within its rights in forcing an employee to arbitrate a dispute instead of taking it to court, even though the action that sparked the dispute took place after the employee left the company.
Jon V. Davidson began working for A. G. Edwards as a broker/dealer in 1994, working with clients in 16 states. He voluntarily retired from the company in 2007, having apparently decided to set up his own business. Shortly after his departure, A. G. Edwards sent letters to Davidson's former customers, encouraging them to remain with A. G. Edwards rather than to follow Davidson in his new venture. The letter read, in part,
“As with any firm in the industry, there would be an account transfer fee if you decide to move your account. Also, make sure you know what kind of annual account fees you would have to pay at another firm. At A. G. Edwards, we do not have fees on our basic brokerage accounts. Know that at other firms you may be subject to minimum account fees depending on the size of your account or even be pushed out to a call center if this new firm decides your account is not large enough for you to continue your relationship with Jon V. Davidson. Although you have developed a relationship with Jon V. Davidson, please ask yourself if it is in YOUR best interest to transfer your account.” (emphasis in original.)
When he learned of the letter, Davidson sued the company for defamation, claiming that the company’s letter implied that he was committing theft, fraud, deceit, conversion of monies, and other illegalities. Edwards asked the court to force Davidson to arbitrate the dispute, based on a clause in Davidson’s employment contract, in which he agreed to submit to arbitration any controversy or dispute arising between him and Edwards. The court granted the company’s motion to compel arbitration. Davidson appealed.
In his appeal, Davidson argued that the arbitration clause was unenforceable under the Federal Arbitration Act because his claim arose after he left the job. The court looked at decisions of federal appellate courts that faced similar issues and noted that they defined the crucial question as whether the alleged defamation touched on the terms of Davidson’s underlying employment contract. The contract, the court pointed out, covered any controversy or dispute arising between him and Edwards relating to the contract itself or to his employment. Several appellate federal courts, this court decided, have held that arbitration clauses in employment contracts extended to claims filed as much as two years after an employee’s termination.
Applying that standard to the evidence in the case, the court said that it was clear that Davidson’s claim of defamation stemmed from statements related to his handling of his clients' accounts while working for A. G. Edwards. So, the state appellate court ruled that because the alleged defamation touched Davidson's employment contract, the trial court did not err in granting A. G. Edwards' motion to compel arbitration after his employment terminated.
Davidson v. A.G. Edwards & Sons, Ga. Ct. App., No. A13A1115 (Sept. 19, 2013).
Diane Cadrain is an attorney who has been writing about employment law issues for more than 20 years.