Labor & Employment Law Daily Wrap Up, ARBITRATION—D.N.M.: Employer’s motion to compel arbitration of ADA claims denied absent enforceable contract, (Sep 21, 2026)

By Nicholas Kaster, J.D.

The contractual language gave the employer the option of amending the arbitration agreement after an employee was terminated but before arbitration begins, effectively allowing it to “change the rules of the game just before it starts.”

A federal district court in New Mexico has denied an employer’s motion to compel arbitration of an employee’s discrimination, failure to accommodate, and retaliation claims under the ADA. The court found that the parties did not form an enforceable contract because the employer reserved the right to unilaterally modify the contract, including an arbitration provision, which rendered its promise illusory under New Mexico law. Alternatively, even if the parties formed a valid contract, the employer’s ability to modify the arbitration agreement unilaterally was substantively unconscionable, and the court declined to enforce it (Vise v. Louisiana Hotel Corp., No.1:25-cv-0844 SMD/JHR (D.N.M. Sept. 18, 2026)).

Arbitration agreement contained modification provision. In 2024, the employee entered into an employment contract with her employer, the Louisiana Hotel Corporation. The contract contained an arbitration provision that required the parties to arbitrate any disputes “arising out of or related to” the employee’s employment with the company or termination of employment. Except as otherwise provided, the contract was “intended to apply to the resolution of disputes that otherwise would be resolved in a court of law” and applied, “without limitation, to disputes... arising out of or related to... the employment relationship or the termination of that relationship,... termination, retaliation, discrimination or harassment and claims arising under the... Americans With Disabilities Act.”

Following a brief section with information about the workers’ compensation policy, the contract concluded with information about the employer’s Team Member Handbook and language relevant to contract modifications.

The contract contained the following modification provision:

“The Company reserves the right to change its policies at its sole discretion at any time, including your hours, wages, benefits and working conditions. You also understand and agree that no manager or supervisor or other third party, has the authority to alter, modify or amend the terms or conditions of your employment as set forth herein, including, but not limited to the provision that your employment is at-will.... Any modifications to the terms and conditions set forth in this Agreement (other than revisions to the Team Member Handbook) must be confirmed in writing and signed by the Senior Vice President of Human Resources” (emphasis added).

Disabilities. The employee alleged that she had multiple disabilities. She asserted that she disclosed her conditions to her supervisor and HR and regularly communicated about her medical appointments. In October 2024, the employee “experienced a visible allergic reaction... and was allowed to continue working without medical assessment or accommodations.” She stated that rather than offering ADA support, management scrutinized her emotional state and interactions. Eventually, the employee was sent home without discipline on October 30 and 31, 2024, and she was terminated on November 1, 2024. The employee alleged that the employer “failed to initiate the ADA-required interactive process or provide reasonable accommodations.”

After she was terminated, the employee filed a lawsuit in federal court for discrimination, failure to accommodate, and retaliation under the ADA. The employer moved to compel arbitration of her claims.

Contract was illusory. The court applied state contract law to determine whether the arbitration agreement was valid. New Mexico contract law holds that “an agreement that is subject to unilateral modification or revocation is illusory and unenforceable.” This principle applies equally to agreements to arbitrate. The party that reserves the right to change the agreement unilaterally, and at any time, “has not really promised anything at all and should not be permitted to bind the other party.”

At issue here was whether the modification language in the contract gave the employer “the unfettered right to alter the arbitration agreement’s existence.” The employer argued that the modification language reached only the “policies” contained within the Team Member Handbook, which are set out in a separate document. The court found that the term “policies” referred to the Team Member Handbook, and the term “this Agreement” referred to the contract. In fact, the court noted, the contract took great pains to distinguish “[t]his Agreement” from the Handbook policies. The first paragraph under the section entitled Team Member Handbook reflects the employee’s acknowledgement of their receipt of “this Agreement” in addition to the “Team Member Handbook, which sets out the Company’s policies.”

Considering the distinction between these two terms, the court found that the modification provision was not limited to the employer’s policies. Instead, it gave the employer the right to change its Team Member Handbook “policies... at any time,” and also to modify “the terms and conditions... in this Agreement” under the specified conditions. The court read that language to mean that the employer may modify any term or condition of the agreement—the 2024 contract—simply by providing a written notice signed by the Senior Vice President of Human Resources. This included, of course, the arbitration agreement, which the employer agreed was a term of the contract. The court construed this language to mean that the employer retained the ability to unilaterally modify the contract, including the arbitration agreement. The court found that this language made the employer’s promise to arbitrate illusory.

The employer argued that even if the court found a unilateral right of modification that resulted in an illusory promise, it was “cured” because the employee’s claim had already accrued. However, said the court, there was no language limiting the timing of the employer’s right to modify, and the fact that it chose not to modify the agreement cannot retroactively cure an invalid contract. Because the employer retained the unilateral right to modify at any time, the agreement was illusory and unenforceable.

Contract was substantively unconscionable. Alternatively, the court held that the contract would be substantively unconscionable in any event. The contractual language allowing the employer to modify the terms and conditions of the agreement placed no restrictions on the timing of such modification. The only limitation was that the modifications must be in writing and signed by the Senior Vice President. This language gave the employer the option of amending the arbitration agreement after an employee was terminated but before arbitration begins, effectively allowing it to “change the rules of the game just before it starts.” The court found the agreement was thus substantively unconscionable as well.

The case is No.1:25-cv-0844 SMD/JHR.

Judge: Davenport, S.

Attorneys: Megan Vise, pro se. Dan A. Akenhead (Law Offices of Dan A. Akenhead) for Louisiana Hotel Corp. d/b/a Sheraton Uptown Albuquerque.

Companies: Louisiana Hotel Corp.; Sheraton Uptown Albuquerque

Cases: Arbitration ContractClaims DisabilityDiscrimination Discrimination Retaliation NewMexicoNews