Maritime Proctor Blog

Arbitration Contracts for Seaman – When Are They Feasible and Appropriate?

Maritime employers, particularly those who own or operate vessels, are always cognizant of the potential for lawsuits for personal injuries and wrongful death.  In the non-personal injury context, utilization of arbitration clauses is a growing trend in both commercial and employment disputes.  It is most common to see an arbitration clause in an employment agreement, signed by both parties, which ostensibly remove disputes from state or federal courts (and juries) and instead submits claims to privately selected arbitrators under (sometimes) wholly different rules.

A plethora of scholarly work analyzes the positives and negatives of such arbitration generally and in particular circumstances.  This blog post focuses on a sliver of a sliver[1] of the arbitration issue: are arbitration agreements feasible for Jones Act seamen, and if so, when are they appropriate?

Before analyzing this specific issue, it is important for the reader to understand some basic, black-letter principles of the law surrounding arbitration clauses generally, as well as crucial tenets of maritime jurisprudence.  Hence, we begin our journey.

The Federal Arbitration Act (“FAA”)

The FAA[2] requires trial courts to enforce arbitration clauses in private arbitration agreements.[3]  The Supreme Court of Texas held in 2018 that there is a presumption of validity afforded to arbitration agreements under the FAA.[4]  The FAA generally requires a trial court to enforce an arbitration provision contained in a maritime contract.[5]

But, the FAA carves out certain types of employment agreements to which this requirement does not apply.[6]  Specifically, Section 1 of the FAA states that the Act does not apply to a seaman’s employment contract, as well as to the employment contracts of other types of workers involved in foreign or interstate commerce.[7]  

The General Maritime Law  of the United States (“GML”)

In a parallel existence, the GML makes Jones Act seamen a protected class of workers.  Decisions of the Supreme Court of the United States, as well as lower courts, routinely refer to seamen as “wards of admiralty,” and afford seamen special protections and deference under the law.[8]

One could argue that the general deference afforded Jones Act seaman statutorily manifests itself in Sections 1 and 2 of the FAA.  But, there are some caveats and exceptions to this general rule.

For example, if a seaman’s labor union negotiates an arbitration clause into the seaman’s employment contract, that arbitration clause is normally held to be valid, as the seaman was ostensibly (through the action of the union) on equal footing with the employer.[9]   However, this is most common with foreign (i.e., non-U.S. citizen) seamen. 

Another exception to this general rule is found in the United States adopting the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“the CREFAA”) in Title 9 of the United States Code.[10]  The Fifth Circuit held in 2004 that this statute could allow for enforcement of an arbitration clause where both employer and employee were American, but the work was to be performed outside U.S. territorial waters.[11]

In contrast, arbitration clauses in employment agreements, whether executed (i) as part of the new hire process or (ii) after the start of the employment, are generally disfavored and rejected for American seamen working in American waters.[12]

With these general points in mind, a safe statement would be that any arbitration clause in a seaman’s employment contract (or other new hire paperwork) would likely be invalid, especially if the seaman and employer are American, and the incident giving rise to the claim occurred in U.S. territorial waters.

But … what if the seaman and his employer enter into an arbitration agreement after an incident giving rise to personal injuries? 

In this scenario, the employer normally offers to (a) continue payment of maintenance and cure benefits and (b) make advances on lost wages while the worker is off work and recovering.  In return, the worker gives up their right to a jury trial and agrees to arbitration while retaining all substantive rights (i.e., a Jones Act negligence claim, an unseaworthiness claim, and a maintenance and cure claim) under the GML.

In this scenario, there are two questions to answer.  First, is the agreement unenforceable as a matter of law?  Second, is the agreement unconscionable?

Post Injury Arbitration Agreements are Generally Enforceable

In 2007, the Fifth Circuit Court of Appeals held in Terrebonne v. K-Sea Transportation Corp. that a post-injury arbitration agreement (a) did not violate Sections 1 and 2 of the FAA and (b) did not violate the Jones Act [through incorporation of Section 5 of the Federal Employers’ Liability Act (“FELA”)].[13]  Thus, the agreement at issue in that case was held valid, and the Fifth Circuit ordered the District Court to refer the matter to arbitration.    

The Issue of Unconscionability

The second question is whether the post-injury arbitration agreement is unconscionable.  The case precedent indicates this inquiry is more of a fact-intensive issue.  There are two types of unconscionable arbitration agreements in Texas.  The first is a procedurally unconscionable agreement, meaning the circumstances surrounding the execution of the arbitration agreement were unfair.[14]  The second is a substantively unconscionable agreement, or an analysis of whether the agreement is so one sided as to make it fundamentally unfair, “given the parties general commercial background and the commercial needs of the particular trade or case.”[15]

Thus, while post-injury agreements are valid under the GML, one must be extremely careful in not only the drafting of the agreement and arbitration provision, but also in the manner in which the seaman’s signature is procured.  A key holding from the Fourteenth Court of Appeals indicates that if a seaman mounts a challenge on procedural unconscionability and a trial court has jurisdiction over that issue, an evidentiary hearing is required to avoid abuse of discretion.[16]  Given this requirement, development of evidence demonstrating the validity of the agreement should be a high priority.

[1] Or a penumbra of a penumbra, if you will. 

[2] 9 U.S.C. §§1-16

[3] New Prime, Inc. v. Oliveira, 139 S.Ct. 532, 536 (2018).

[4] Henry v. Cash Biz, L.P., 551 S.W.3d 111, 115 (Tex. 2018).

[5] 9 U.S.C. § 2.

[6] See 9 U.S.C. §§ 1-2.

[7] 9 U.S.C. § 1; New Prime, Inc., 139 S.Ct. at 537.

[8] U.S. Bulk Carriers, Inc. v. Arguelles, 400 U.S. 351, 355 (1971); Asignacion v. Rickmers Genoa Schiffahrtsgesellschaft mbH & CieKG, 783 F.3d 1010,  1017 (5^th Cir. 2015)

[9] Asignacion, 783 F.3d 1010, 1017.

[10] 9 U.S.C. §§201-208.

[11] Freudensprung v. Offshore Tech Servs., 379 F.3d 327, 338-340 (5^th Cir. 2004).

[12] See Buckley v. Nabors Drilling United States, 190 F.Supp.2d 958, 959 (S.D. Tex. 2002).

[13] 477 F.3d 271, 281-284 (5^th Cir. 2007);

[14] In re Weeks Marine, Inc., 242 S.W.3d 849, 859 (Tex. App. – Houston [14^th Dist.] 2009, mand. denied).

[15] In re FirstMerit Bank, N.A., 52 S.W.3d 749, 757 (Tex. 2001)(orig. proceeding).

[16] In re Weeks Marine, Inc., 242 S.W.3d at 863.