MADDY et al v. GENERAL ELECTRIC COMPANY

Filing 103

OPINION. Signed by Judge Joseph E. Irenas on 1/21/2015. (TH, )

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

DONALD MADDY, KURT FREDRICK,
FREDRICK R. SHELLHAMMER, III,
FRANK MICHIENZI, MARIO
LAUREANO, ANOTHONY CHELPATY,
WILLIAM MADDEN, STEVEN LE
BLANC, JEFFREY SCOTT WILKERSON,
JEFFREY NACARETTE, PHILLIP ERIC
BENSON, BRADLEY PALMER, THOMAS
KISS, Individually, and on
behalf of all others similarly
situated,
Plaintiffs,
v.
GENERAL ELECTRIC COMPANY, a New
York corporation,
Defendant.

APPEARANCES:
SWARTZ SWIDLER, LLC
By: Justin L. Swidler, Esq.
Richard S. Swartz, Esq.
1878 Marlton Pike East, Ste. 10
Cherry Hill, New Jersey, 08003
ROBERT D. SOLOFF, P.A.
By: Robert D. Soloff, Esq.
7805 S.W. 6th Court
Plantation, Florida 33324
ALLEN EICHENBAUM
By: Allen Eichenbaum, Esq.
10059 Northwest 1st Court
Plantation, Florida 33324
Counsel for Plaintiffs
1

HONORABLE JOSEPH E. IRENAS
CIVIL ACTION NO. 14-0490
(JEI/KMW)
OPINION

LITTLER MENDELSON, P.C.
By: Nina Markey, Esq.
Rachel Fendell Satinsky, Esq.
Aaron Reed, Esq. (pro hac vice)
Daniel B. Boatright, Esq. (pro hac vice)
1601 Cherry Street, Suite 1400
Philadelphia, Pennsylvania 19102
Counsel for Defendant General Electric Company

IRENAS, Senior District Judge:
Plaintiffs, service technicians for General Electric
Company’s (“GE” or “Defendant”) Appliances Division, brought
this putative collective action pursuant to § 216(b) of the Fair
Labor Standards Act (“FLSA”) to recover allegedly unpaid
overtime compensation from Defendant.
Currently pending before the Court is Defendant’s motion to
compel arbitration of claims asserted by two opt-in Plaintiffs,
Jeremy Gifford and Jesse Guerra.

For the reasons explained

herein, Defendant’s motion is DENIED.

I.

BACKGROUND1

Plaintiffs Gifford and Guerra worked or work currently as
service technicians for Defendant.

Mr. Gifford began working

for Defendant in February 25, 2002, and remains employed by

1

The background facts of this case are set out in detail in the Court’s
Opinion granting Plaintiffs’ prior motion to conditionally certify this
collective action. See Maddy v. General Elec. Co., No. 14-490 (JEI/KMW),
2014 WL 5934114 (D.N.J. Nov. 14, 2014). The Court repeats only those facts
relevant to the present motion.

2

Defendant today.

(Def.’s Motion at 1)

Mr. Guerra worked for

Defendant from March 6, 2000, to August 1, 2014.

(Id.)

Service technicians in GE’s Appliances Division work across
96 “zones” within the United States.

In 42 of the 96 zones,

service technicians are represented by various unions though
collective bargaining agreements (“CBAs”).

In the remaining 54

zones, service technicians are not represented by a union.

All

service technicians receive an hourly wage, plus overtime for
hours worked in excess of 40 per week, or as otherwise required
by local law or applicable CBAs.

(Declaration of Kristin

Mathers (“Mathers Decl.”), Docket No. 38-1 ¶ 10)
Defendant now asks the Court to compel certain opt-in
Plaintiffs who were not represented by a union, Mr. Gifford and
Mr. Guerra, to arbitrate their claims pursuant to GE’s
“Solutions” program, an alternative dispute resolution
procedure.

Under the Solutions program, “Covered Employees and

the Company are not allowed to litigate a Covered Claim in any
court” (Solutions, Ex. 2 to Def.’s Reply at 7)

Instead, Covered

Employees must pursue Covered Claims through a particular
procedure laid out in the Solutions documents.2

Arbitration, the

final step in the program, is administered by a Dispute

2

There are four levels a Covered Employee must follow: (I) meeting with a
direct manager, (II) meeting with a higher level manager and an HR
representative, (III) mediation, and (IV) arbitration. A Covered Employee
may request to skip Level I, and, “[w]here circumstances warrant, the parties
also may agree to skip Solutions Level II.” (2009 Solutions at 7)

3

Resolution Organization (“DRO”) that GE designates.

(2009

Solutions at 9)
Defendant claims that Plaintiffs Gifford and Guerra
received training on Solutions and “expressly agreed” to
arbitrate all Covered Claims pursuant to the Solutions program
by way of an Acknowledgement form each signed in September 2009.
(Def.’s Motion at 3)

The Acknowledgements, dated September 22,

2009, and September 23, 2009, respectively, state as follows:
You have received and reviewed the Solutions training
and have been provided with an electronic copy of the
full Solutions procedure document.
You have been informed that by continuing your
employment with the Company after June 30, 2009, you
will be bound by the terms of the Solution procedure.
As detailed more fully in the Solutions procedure and
training, Solutions provides that Covered Claims (as
defined in the Solutions procedure) against the
Company must be pursued through the Solutions
Procedure. Covered Claims against the Company may not
be pursued in court, or on a class action basis either
in court or through Solutions. An arbitrator’s award
is the exclusive, final and binding determination of
any and all Covered Claims that proceed to the fourth
level of Solutions.
(Exs. 2 & 3 to Def.’s Motion)
Under Solutions, “Covered Claims” include claims “relating
to compensation, promotion, demotion or other employment
actions,” among others.

(2009 Solutions at 5)

The parties do

not dispute that the claims in this case, if Gifford and Guerra
were subject to Solutions, would fall under this definition of
4

Covered Claims.

The meaning of “Covered Employee,” on the other

hand, is less clear.
In its original moving papers, Defendant attached the 2008
Solutions program documents, under which “Covered Employees”
included only “Executive Band and above employees in all GE
businesses.”

(2008 Solutions at Appendix A, p. 24)

In response

to Plaintiffs’ opposition, and apparently conceding that the
2008 Solutions program documents were not applicable to
Plaintiffs, Defendant submitted the 2009 version of Solutions
with its reply brief.

The 2009 Solutions program documents

expands the 2008 definition of “Covered Employees” to include
“All GE Consumer & Industrial3 employees in Senior Professional
band positions and below who are classified by the Company as
exempt, and non-exempt salaried employees.”

(2009 Solutions at

Appendix A, p. 24)
During oral argument, Defendant stated for the first time
that “salaried employees,” as defined internally by GE and
understood within the Solutions documents, includes service
technicians paid on an hourly basis.

Defendant then submitted a

new Declaration from Melissa Lee, an Employee Relations
Specialist for the business segment that employs Plaintiffs, who
claims that “Service technicians are designated as ‘non-exempt

3

Defendant states that putative class members, all GE service technicians,
work within this division. (Def.’s Reply at 2)

5

salaried employees’ within GE’s internal payroll system for
benefits purposes only, i.e. so that they receive the same
benefits as salaried employees.”

(Meliessa Lee Declaration

(“Lee Decl.”), Docket No. 91, at ¶ 3)
Defendant presently moves to compel arbitration of
Plaintiffs Gifford and Guerra’s FLSA claims.

II.

STANDARD

Under the Federal Arbitration Act (“FAA”),
A party aggrieved by the alleged failure, neglect, or refusal
of another to arbitrate under a written agreement for
arbitration may petition any United States district court
which, save for such agreement, would have jurisdiction under
Title 28, in a civil action or in admiralty of the subject
matter of a suit arising out of the controversy between the
parties, for an order directing that such arbitration proceed
in the manner provided for in such agreement.
9 U.S.C. § 4.

The FAA states further that any agreement to

settle a dispute by arbitration “shall be valid, irrevocable,
and enforceable, save upon such grounds as exist at law or in
equity for the revocation of any contract.”

Id. at § 4.

There is a “strong federal policy in favor of resolving
disputes through arbitration.”

Century Indem. Co. v. Certain

Underwriters at Lloyd's, London, subscribing to Retrocessional
Agreement Nos. 950548, 950549, 950646, 584 F.3d 513, 523 (3d
Cir. 2009).

However, “arbitration is a matter of contract and a

party cannot be required to submit to any dispute he has not
6

agreed so to submit.”

AT&T Technologies, Inc. v. Communications

Workers of America, 475 U.S. 643, 648 (1983).

Before compelling

arbitration, courts must therefore determine: (1) whether a
valid agreement to arbitrate exists, and (2) whether the
particular dispute falls within the scope of that agreement.
Century Indem., 584 F.3d at 523.
Since Plaintiffs do not contend that the particular dispute
in this case over uncompensated overtime work would fall within
the scope of the Solutions program, the only relevant inquiry
here is whether Plaintiffs Gifford and Guerra were bound by
Solutions in the first place.

Plaintiffs argue that no such

valid agreement existed because the Solutions’s terms do not
apply to service technicians, are indefinite and unconscionable,
and violate the National Labor Relations Act.

III. ANALYSIS
Defendant’s motion to compel must fail for two reasons.
First, Defendant has not submitted evidence sufficient to show
that the Acknowledgments Gifford and Guerra signed constituted
valid agreements to the Solutions Procedure.

Second, even

assuming their agreement to Solutions, Plaintiffs Gifford and
Guerra do not fall under the category of “Covered Employees”
subject to the program, which means that they were not bound to
arbitrate their present claims.
7

1. Acknowledgment Forms
The documents Defendant submitted in support of its motion
to compel arbitration fail to establish that Plaintiffs Gifford
and Guerra agreed to commit to the 2009 Solutions Program.
“For a Court to compel arbitration, it initially must find
that there is a valid agreement because the basis for
contractual arbitration is consent, not coercion.”

Century

Indem. Co. v. Certain Underwriters at Lloyd's, London,
subscribing to Retrocessional Agreement Nos. 950548, 950549,
950646, 584 F.3d 513, 523 (3d Cir. 2009) (citing Mastrobuono v.
Shearson Lehman Hutton, Inc., 514 U.S. 52, 57 (1995)).

Although

the FAA requires that “questions of arbitrability must be
addressed with a healthy regard for the federal policy favoring
arbitration,” Moses H. Cone Hosp. v. Mercury Constr. Corp., 460
U.S. 1, 24–25 (1983), courts apply ordinary state law principles
of contract formation when determining whether the parties have
agreed to arbitrate, First Options of Chicago, Inc. v. Kaplan,
514 U.S. 938, 944 (1995).
As an initial matter, Plaintiffs ask the Court to apply
Texas law with respect to contract formation issues in this
case.

The Solutions Program contains a “Governing Law”

provision stating that the Solutions “shall be construed,
interpreted and applied in accordance with the law of the State
of New York, without regard to choice of law principles.”
8

(2009

Solutions at 10)

Plaintiffs argue that this clause does not

reach issues regarding whether a valid agreement to arbitrate
existed between the parties.

For this reason, Plaintiffs

request that the Court look to Texas law, since Gifford and
Guerra live and work in the State of Texas.
The Court agrees with Plaintiffs that Solution’s “Governing
Law” provision is, by its own terms, limited to the
construction, interpretation and application of the Solutions
Program.

Since Plaintiffs Gifford and Guerra reside and work in

the State of Texas, the Court will apply Texas principles of
contract formation when determining whether Gifford and Guerra
agreed to arbitrate their claims against Defendant.
“Under Texas contract law, a legally enforceable contract
consists of (1) an offer, (2) an acceptance, (3) a meeting of
minds, (4) each party's consent to the terms, and (5) execution
and delivery of the contract with the intent that it be mutual
and binding.”

Forged Components, Inc. v. Guzman, 409 S.W.3d 91,

100 (Tex. App. 2013) (internal quotations omitted).
Absent from the Acknowledgments Gifford and Guerra signed
is any explicit language of actual agreement.

On its face, each

“Acknowledgment” is merely that – a letter confirming that the
signee has been informed that his continued employment binds him
to the Solutions procedure.

But the fact that Plaintiffs

9

Gifford and Guerra have been informed of Solutions does not mean
that they agree to the substance of the program.
Defendant points out that other courts have routinely
granted motions to compel arbitration pursuant to Solutions or
other GE alternative dispute resolution programs.

See Pingel v.

General Elec. Co., No. 3:14 CV-00632, 2014 WL 7334588 (D. Conn.
Dec. 19, 2014); Tweedy v. GE Capital Retail Finance, No. 1:13cv-00038, 2014 WL 695824 (S.D. Ohio Feb. 24, 2014); Curtis v. GE
Capital Corp., No. 5:12CV133-RLV, 2013 WL 4212932 (W.D.N.C. Aug.
15, 2013); Dixon v. NBCUniversal Media, LLC, 947 F. Supp. 2d 390
(S.D.N.Y. 2013); Santos v. GE Capital, 397 F. Supp. 2d 350 (D.
Conn. 2005); Gonzalez v. GE Group Administrators, Inc., 321 F.
Supp. 2d 165 (D. Mass. 2004).

However, the acknowledgements in

these cases contain explicit “agreements,” and, in the Court’s
opinion, actually militate against finding an enforceable
contract in this case.
In Pingel, the acknowledgment form plaintiff signed stated
that her signature “constitutes acknowledgement of [her] receipt
and review of a copy of and agreement to the Solutions
Procedure.”

2014 WL 7334588, at *1 (emphasis added).

In

Tweedy, Curtis, Santos, and Gonzalez, which all involved an
earlier form of Solutions called RESOLVE, the acknowledgments
signed by each plaintiff read “I acknowledge that I have
received and reviewed a copy of the ‘RESOLVE Program Handbook.’
10

I agree to resolve disputes in accordance with the terms of the
‘RESOLVE Guidelines’ . . .”

Tweedy, 2014 WL 695824, at *2;

Curtis, 2013 WL 4212932, at *1; Santos, 397 F. Supp. 2d at 35455; Gonzalez, 321 F. Supp. 2d at 168 (emphasis added).4

The

acknowledgements Plaintiffs Gifford and Guerra signed lack the
language of agreement so clearly set forth in these other
acknowledgment forms.
Defendant argues that the words “I agree” are not necessary
in the acknowledgement forms to enforce compliance with the
Solutions program.

Under Texas law, an employee “accepts” an

arbitration agreement, as a modified condition of employment, if
he receives notice that unequivocally communicates definite
changes in his employment terms and continues working with
knowledge of these modified employment terms.

In re Dillar

Dept. Stores, Inc., 198 S.W.3d 778, 780 (Tex. 2006).
case is not so simple.

But this

The Acknowledgments Gifford and Guerra

signed do not specify which version of Solutions they received.
This is particularly important as it relates to the parties’
dispute of which employees are “covered” under Solutions, a
designation that apparently expanded from the 2008 version of
the program to the 2009 version.

The Court discusses this issue

at length below, but it deserves mentioning here.

4

The other cases Defendant references do not contain the complete language of
the relevant acknowledgment forms.

11

If Gifford and Guerra received the 2008 version of
Solutions, which identified “Covered Employees” as “Executive
Band and above,” they would have had no reason to believe that
the program applied to them.

If they received the 2009 version,

which expanded “Covered Employees” to include the division of GE
that employs Plaintiffs, they would read that “exempt and nonexempt salaried employees” in that division are bound by
Solutions.

However, Gifford and Guerra are unmistakably hourly

employees.

As explained below, Defendant claims to have an

internal definition of “salaried” that includes service
technicians, but that internal definition does not appear in the
Solutions Program documents or in the Acknowledgments.

Again, a

person in Gifford and Guerra’s shoes would quite reasonably
believe himself not to be “covered.”

Defendant submitted a

Declaration from Eric Leef stating that the 2009 version is what
service technicians like Gifford and Guerra “would have received
and been trained on.”
6)

(Leef Decl., Ex. A to Def.’s Reply, at ¶

The Court does not find this conditional statement entirely

reassuring.5

The combination of Acknowledgments without clear

language of assent, and ambiguity as to which version of

5

Further, considering that Defendant
support of the present motion (and in
conditional certification), it is not
Guerra may not have received the 2009
Acknowledgment forms.

originally submitted the 2008 version in
support of the prior motion for
a stretch to imagine that Gifford and
version prior to signing the

12

Solutions Gifford and Guerra received, do not “unequivocally
communicate definite changes” in their employment.
The Court will not make assumption after assumption in the
absence of express statements and direct evidence, particularly
where a sophisticated party like Defen ndant has in other cases
been so explicit, to hold that Plaintiffs Gifford and Guerra
waived their statutory rights to pursue their FLSA claims in a
court of law.

It is unclear that Gifford and Guerra agreed they

were bound by the Solutions Procedure.

It is unclear which

version of Solutions they reviewed in the first place.

And it

is unclear how they would recognize themselves as “salaried
employees” under the 2009 version of the program.

For these

reasons, the Court finds that the Acknowledgment forms did not
constitute valid agreements to the 2009 Solutions procedure and,
more specifically, its arbitration requirement.

Defendant’s

motion to compel arbitration will therefore be denied.
2. “Covered Employees”
Even if Plaintiffs Gifford and Guerra agreed to be bound by
the Solutions procedure, the terms of the Solutions program do
not seem to require service technicians, who are hourly
employees, to arbitrate their current claims against Defendant.
Gifford and Guerra cannot be said to have signed a valid
agreement to arbitrate through their Acknowledgments if the

13

underlying Solutions program, by its own terms, does not bind
them to arbitration.
Under the 2009 Solutions Program documents, the group of
“Covered Employees” who cannot litigate any “Covered Claims” in
any court includes “[a]ll GE Consumer & Industrial employees in
Senior Professional band positions and below who are classified
by the Company as exempt, and non-exempt salaried employees.”
(2009 Solutions at Appendix A, p. 24)

Defendant argues that

this description of Covered Employees includes Plaintiffs
Gifford and Guerra.
In response, Plaintiffs highlight that Gifford and Guerra
are hourly, not salaried employees, and therefore not Covered
Employees under Solutions.

Plaintiffs point to HR manager

Kristin Mathers’s Declaration, which Defendant submitted in
opposition to Plaintiffs’ prior motion for conditional
certification, which states that “service technicians are paid
an hourly wage, plus overtime for hours worked in excess of 40
per week . . .” (Mathers Decl., Docket No. 38-1)
Defendant did not address this apparent discrepancy in
their motion papers.

However, Defendant stated during oral

argument that GE internally designates service technicians as
“salaried employees,” even though the technicians receive wages
on an hourly basis.

Defendant also submitted a Declaration from

Employee Relations Specialist Melissa Lee, who claims that
14

“Service technicians are designated as ‘non-exempt salaried
employees’ within GE’s internal payroll system for benefits
purposes only, i.e. so that they receive the same benefits as
salaried employees.”

(Lee Decl., Docket No. 91, at ¶ 3)

This

expanded definition of “salaried” does not appear anywhere in
the Solutions Program documents.
This dispute over the term “salaried employees” requires
the Court to interpret that language as used within the
Solutions program documents.

Pursuant to Solution’s “Governing

Law” provision, the Court will interpret this term “in
accordance with the law of the State of New York.”
Plaintiffs ask the Court not to consider evidence extrinsic
to the agreement when construing a plain and unambiguous term
such as “salaried employees.”

See Airco Alloys Div. v. Niagra

Mohawk Power Corp., 76 A.D.2d 68, 76 (N.Y. App. Div. 4th Dep’t.
1980) (“The rule is well settled that the construction of a
plain and unambiguous contract is for the court to pass on, and
that circumstances extrinsic to the agreement will not be
considered when the intention of the parties can be gathered
from the instrument itself.”) (internal quotations omitted).
Indeed, “Salaried employees” is not an ambiguous term.

The FLSA

explicitly defines what it means to be paid on a “salary basis”:
An employee will be considered to be paid on a
‘salary basis’ within the meaning of these
regulations if the employee regularly receives each
15

pay period on a weekly, or less frequent basis, a
predetermined amount constituting all or part of
the employee’s compensation, which amount is not
subject to reduction because of variations in the
quality or quantity of the work performed.
29 C.F.R. § 541.602.

Plaintiffs Gifford and Guerra, who receive

compensation on an hourly basis for their work as service
technicians, would clearly not fall within this accepted
definition, or any other plain reading of “salaried.”
However, the context of “salaried” within the Solutions
Program documents establishes some confusion in an otherwise
definite term.

Specifically, Solutions provides that “Covered

Employees” include “GE Consumer & Industrial employees . . . who
are classified by the Company as exempt, and non-exempt salaried
employees.”

(Solutions at Appendix A, p. 24) (emphasis added)

In addition, the description of “Covered Employees” excludes
from Solutions particular “GE Consumer & Industrial hourly
employees” who are covered by earlier alternative dispute
resolution programs.

(2009 Solutions at Appendix A, p. 25)

This explicit exclusion assumes that some hourly employees are
classified as “salaried” (i.e. there would not be a need to
exclude such employees if that was not the case).

Since

Defendant does not detail within Solutions who exactly fits
within this classification, the provision is ambiguous.
“In cases of doubt or ambiguity, a contract must be
construed most strongly against the party who prepared it, and
16

favorably to a party who had no voice in the selection of its
language.”6

Jacobson v. Sassower, 66 N.Y.2d 991, 993, (1985)

Defendant alone is responsible for the language in the Solutions
documents, and the Court must therefore construe it in
Plaintiffs’ favor.
The Court also recognizes that, if Gifford and Guerra did
not consent to the terms of the Solutions program, which they
had no apparent ability to negotiate, their only available
course of action would be quitting their jobs.

In that regard,

the alleged agreement to abide by Solutions resembles a contract
of adhesion.

While contracts of adhesion are not themselves

unenforceable, the Court is compelled to interpret such “take it
or leave it” agreements against the drafter.7

See 11 Williston

on Contracts § 32:12 (4th ed. 1990) (“[A]ny contract of
adhesion, which is a contract entered without any meaningful
negotiation by a party with inferior bargaining power, is
particularly susceptible to the rule that ambiguities will be
construed against the drafter.”).
Defendant relies on assertions in the Lee and Leef
Declarations that GE’s internal payroll system designates

6

Although the FAA embodies a strong federal policy favoring arbitration, the
issue here remains whether the language of Solutions provides the basis for a
valid agreement to arbitrate between the parties in the first place.
Consequently, state law contract principles apply.
7 The Court does not find Solutions to be unconscionable in this regard, but
notes that it must scrutinize the underlying documents in a manner more
favorable to the party that had no choice but to agree.

17

service technicians as salaried for benefits purposes, and that
service technicians were trained on Solutions.

Yet, there is no

evidence that a designation “for benefits purposes only” also
extends to GE’s larger “classification” for the purposes of the
Solutions program.

Defendant alone controlled the language of

Solutions and there is simply no indication from the Solutions
program documents that service technicians like Gifford and
Guerra fall within Defendant’s purported definition of salaried.8
For the purposes of this motion, the Court resolves this
ambiguity in favor of Plaintiffs and finds that Gifford and
Guerra are not “Covered Employees” under the Solutions program,
and therefore not bound by the Solutions procedure.9

IV.
For the reasons set forth above, the Court will DENY
Defendant’s Motion to Compel Arbitration.

An appropriate Order

accompanies this Opinion.

Date: January 21, 2015
s/ Joseph E. Irenas
.
Joseph E. Irenas, S.U.S.D.J.

8

That some “hourly” employees are explicitly excluded from Solutions creates
even more confusion as to what “salaried” means and does not provide any
guidance about service technicians specifically.
9 In light of these findings, the Court need not fully address Plaintiffs’
remaining arguments regarding the substance of the Solutions procedure.

18