Walexron is a publicly traded, US multinational corporation headquartered in Little Rock, Arkansas, operating in all 50 states, Europe, Asia, South America, and Africa. In 2009, Walexron was created by the consolidation of a large discount retailer, express carrier, and energy company with the intent to become one of the most powerful and efficient companies in the world.
Manuel Perez was hired by Walexron as a full-time employee in one of the retail store in Brownsville, Texas, in 2009 and was terminated in 2012. Perez filed a lawsuit based on wrongful termination in which he asserted the company terminated him after he complained about various employment practices that violated state and federal laws. Walexron filed a petition to compel arbitration as required by the employee handbook. Walexron claimed the arbitration policy was displayed on page 51 in the employee handbook that Perez agreed to abide by as evidenced by his signature acknowledging receipt of the handbook. The clause provides, in part, that arbitration will be the exclusive forum for resolving all disputes between Employer and Perez “arising out of claims for wrongful termination, discrimination, retaliation or harassment in violation of state or federal law, alleged violation of state or federal family and medical leave laws and other laws pertaining to employment, and for unpaid wages under state or federal law.” Another provision of the Handbook provides that it “is not intended to create a contract of employment and does not in any way alter the at-will employment relationship between [Employer] and its Employees.”
Perez signed a document titled “Acknowledgment of Receipt of Employee Handbook,” which states that the Handbook contains important information about Employer’s general personnel policies and Perez’s privileges and obligations as an employee. The document also states, “I understand that I am governed by the content of the Handbook and that [Employer] may change, rescind or add to any policies, benefits or practices described in the Handbook from time to time in its sole and absolute discretion, with or without prior notice.” Perez asserts that English was not his first language and had difficulty reading and understanding the handbook.
Over the past two years, Walexron had 36 claims brought to arbitration by employees. All 36 claims were arbitrated by the same dispute resolution agency selected by Walexron.
Six months ago, a customer testing a treadmill sold in one of the retail stores was injured when the machine stopped abruptly and threw the customer into a wall. During a review of the discovery documents, it was determined that Dee Struction, an employee of Walexron, deliberately tampered with the machines in retaliation for being passed over for promotion to store manager.
Walexron entered into an agreement with Chuangxiang Toys in China to manufacture remote control helicopters, which would carry the name RC Ranger Helicopter W450. Walexron requires its overseas suppliers to conduct quality control testing on most of its imported products before selling them in the stores. In a recent study, there was a small indication that the helicopters had the potential to catch fire if the batteries overheat. Walexron’s executives approved the design anyway, and the helicopters were delivered to Walexron’s stores in the United States, Canada, and South America. Initial market response to the Ranger Helicopters was positive, and many competitors eyed the unique feature of the camera located in the helicopter.
A Walexron employee, Lou Scannon, leaked the findings of the safety study to the public and a consumer watchdog group. In a press conference called by Scannon, Lou explained the safety testing process for the Ranger Helicopter and results in detail. Walexron hired Scannon as Director of Purchasing in 2012 and offered him a 5-year contract. In January 2013, Scannon verbally agreed to a confidentiality provision as an addition to his 5-year written employment contract.
Kwong Lee, a customer of the photo department at a Walexron store in New Jersey, completed her order online, supplying her full name and phone number. When she picked up her prints at the store, she noticed the receipt showed her name as Ching Chong Lee. Lee was visibly upset and later so angry that she could not eat or sleep.
The express delivery service division of Walexron regularly picked up packages of documents from Goin Postal, a packing, shipping, and crating business located in New York. Walexron delivered Postal’s packages all over the world. Goin Postal was a partnership formed by Minnie Stree, Alf Abett, and Duncan Doenutts. Goin Postal was behind on its payments and owed Welexron over $200,000. After collection efforts failed, Welexron sued Goin Postal and obtained a judgment for $200,000 judgment in Welexron’s favor.
On the advice of the legal department, the board of directors for Welexron decided to seek enforcement of the judgment against Alf Abett, acting on a tip that Mr. Abett had inherited a large sum of money and that the other partners had no personal assets. As it turned out, Mr. Abett only inherited $10,000 and did not have the funds to pay the judgment. Welexron incurred substantial attorney fees in attempting to collect its judgment from Goin Postal.
Adam Upp worked in the accounting department and had been with the retail division for 10 years. Adam started out as a cashier in one of the stores, was promoted to store manager, and eventually promoted to the accounting department at headquarters. Adam received numerous positive job evaluations over the years with the company. Adam and his life partner Pat receive medical, dental, and life insurance benefits as part of Adam’s employment package with Walexron.
Adam reported to the Director of Accounting, Eve Ann Jellical, who recently transferred to the retail division from the express delivery division. Eve took away a good portion of Adam’s responsibility and froze his pay. Other employees heard Eve Ann say, “Same-sex marriages are wrong. The Bible states that marriage should be between a man and a woman.” Eve Ann posted Bible verses in the breakroom and at the bottom of her e-mails. Adam reported Eve’s behavior to Human Resources, but Eve’s behavior only escalated after the report. Adam quit two months after filing the report.
One of the employees who worked for Adam, Cybil Wrights, reported Adam’s treatment to the EEOC. Cybil was an at-will employee who had been with Walexron five years. In response to the EEOC report, Eve Ann Jellical terminated Cybil.
Respond to the following questions using course material and credible outside research to support your findings. Please submit findings in an 8- to 12-page paper using APA format.
- Will Manuel Perez prevail in invalidating the arbitration clause? Why or why not? Discuss the legal considerations the court will entertain in reaching its decision.
- Identify the ethical concerns regarding Walexron’s approach to the arbitration process and recommend actions Walexron could take to remedy the ethical concerns.
- Is Walexron responsible for the actions of Dee Struction? Why or why not?
- Can Walexron hold Lou Scannon responsible for misappropriation of a trade secret?
- Is the confidentiality provision within Scannon’s employment contract valid?
- Identify possible claims Kwong Lee might bring against Walexron and the employee who printed the receipt. Which party is most likely to win? Why?
- Can Walexron seek to recover from Alf Abett individually on the judgment for the Goin Postal partnership? Why or why not?
- Using the Business Judgment Rule, did the board of directors fulfill its duty of care to shareholders in suing Alf Abett individually for the Goin Postal judgment? Why or why not?
- Can Adam Upp sue Walexron for employment discrimination? Can Adam argue constructive discharge in this instance? Can Walexron fire Cybil? Why or why not?
- As the new Director of Compliance, you have reviewed each of the issues presented and the Vice President of Legal requested that you identify any ethical and legal concerns and provide recommendations on how to avoid both legal and ethical issues in the future. Be specific and detailed, and be sure to base recommendations on relevant legal and ethical principles.