Labor & Employment Law Daily Wrap Up, ARBITRATION—D. Utah: Sex discrimination, harassment claims may proceed to court, arbitration agreement possibly illusory, (Jun 11, 2025)

By Cathleen Calhoun, J.D.

“A question of contract formation is for the court to decide.”

In denying a motion to compel arbitration in a case involving allegations of sex discrimination and harassment, a U.S. district court in Utah found that the question of whether an actual contract was formed that would require arbitration was a question for the courts, not an arbitrator. The employee had signed an acknowledgement of reading the employee handbook that included a provision that any legal claims would go to arbitration. However, the employer also included language that the terms of the employee handbook could be changed at any time (Watson v. EnableUtah, No. 1:24-cv-00176-JNP-JCB (D. Utah Jun. 9, 2025)).

The employee worked as an executive assistant from 2021 to 2024 for a nonprofit organization that helps people with disabilities find meaningful work. Her employment stopped there when she was allegedly screamed at and told to “go home” after she informally reported her supervisor’s behavior to the Human Resources Department.

Alleged morality policing. The employee claimed that during her employment, she was repeatedly discriminated against, harassed, and abused on the basis of her sex. For example, she alleged that her direct supervisor frequently commented on her (perceived) sex life and expressed his desire that she be abstinent. When she learned she was underpaid in comparison to other employees, her supervisor agreed to give her a raise but allegedly on the condition that she sign a special morality contract that no other employee was required to sign. In addition, when the employee said that she was sexually assaulted by a donor, her supervisor demanded that she continue to interact with that donor and said that she should hope that she has a witness to the assault next time, according to the employee.

Charges and lawsuit. The employee filed a charge of discrimination with the EEOC and received a right-to-sue letter. Based on the letter, she timely filed suit, claiming sex discrimination, sexually hostile work environment, retaliation, and negligent employment against the nonprofit; false imprisonment and assault against the nonprofit and her direct supervisor; and intentional infliction of emotional distress against the nonprofit, her direct supervisor, and another employee with a supervisory role over her.

Motion to compel arbitration. The nonprofit and other defendants filed a motion to compel arbitration, based on the mandatory-arbitration clause in the employee handbook. In the employer’s view, the employee signed acknowledgment of the handbook and agreed to abide by the arbitration clause as a condition of her employment, and no grounds for revocation existed. The employee disagreed, arguing that the arbitration provision is illusory because the handbook gave the nonprofit an unrestricted right to change any term, for any reason, and at any time. As a result, the employee claimed that the arbitration clause is unenforceable.

Contract formation at issue. The court found that the issue in the Tenth Circuit Dumais v. American Golf Corp. case very closely resembled the case at hand. That case involved a claim of illusoriness, that goes to the question of contract formation, rather than to the question of contract enforcement. The court noted that “when the parties have an otherwise-valid arbitration agreement, the question of which provisions in the contract are enforceable and whether the unenforceable provisions can be severed becomes an issue for the arbitrator, not the court.” Here, however, a challenge to contract formation, unlike a challenge to contract enforceability, does not raise the severability question because if no contract was formed, then there is no agreement from which an arbitration clause can be severed. As a result, the court followed the lead of Dumais and held that it is for a court, not an arbitrator, to resolve the employee’s illusoriness challenge.

The case is No. 1:24-cv-00176-JNP-JCB.

Judge: Parrish, J.

Attorneys: Jenifer L. Tomchak (Tomchak Skolout Law Group) for Amanda Watson. Mark A. Nickel (Gordon Rees Scully Mansukhani) for EnableUtah.

Companies: EnableUtah

Cases: Arbitration Discrimination SexDiscrimination SexualHarassment Procedure UtahNews