FLAUM, Circuit Judge.
Mona Gibson appeals the district court's dismissal of her claims under Title VII and the Americans with Disabilities Act ("ADA") against her former employer, Neighborhood Health Clinics ("NHC"). The district court dismissed Gibson's claims on the ground that she had contractually agreed to submit any claims against NHC to arbitration. We reverse and remand.
Gibson, who had previously been employed by NHC under circumstances not relevant to the instant case, was rehired by NHC on December 22, 1994. On December 30, 1994, at which time Gibson, although rehired, had not yet returned to work, NHC held a meeting at which all employees were presented with a new Associates Policy Manual (the "Manual"), and required to sign a new Associates Understanding (the "Understanding"). Gibson was not required to attend the meeting and in fact she did not. The Understanding included the following language:
The Manual states that when an employee alleges a violation of her rights under the ADA or Title VII (or other provisions not relevant here):
(emphasis and capitalization in the original). The opening two paragraphs of the Manual include the following language:
The arbitration provisions were not part of the terms of employment during Gibson's previous tenure with NHC.
When Gibson was hired in December 1994, she was informed that she should report to work on January 9, 1995. On that date, she met with NHC's personnel director, Chris Baxter, who handed Gibson a stack of papers to sign, including insurance and tax forms. Among the papers was the Understanding. Gibson testified at her deposition that when she asked Baxter about the Understanding, Baxter told her that it was a form that everybody signed so that complaints about time off could be settled through a grievance procedure. The Manual referenced in the Understanding was not given to Gibson at
NHC fired Gibson on April 6, 1995. On May 15, 1995, Gibson filed a discrimination claim with the Equal Employment Opportunity Commission, alleging sex and disability discrimination. NHC was informed of this charge shortly thereafter. Gibson then filed her complaint in the district court. NHC moved to dismiss Gibson's complaint on the ground that she had waived her right to a judicial determination of her claims against NHC by agreeing to submit such disputes to arbitration. The district court agreed, concluding that the Manual in connection with the Understanding created an enforceable arbitration agreement, and granted the motion to dismiss. In addition, because Gibson failed to abide by the deadline for submitting her claim to arbitration, the dismissal effectively foreclosed her ability to obtain redress. The district court therefore entered final judgment, from which Gibson now appeals. We have jurisdiction pursuant to 28 U.S.C. § 1291.
On appeal, the parties debate an important issue: whether the prerogative of litigating one's Title VII and ADA claims in federal court is the type of important right the relinquishment of which requires a knowing and voluntary waiver. The Supreme Court indicated in Alexander v. Gardner-Denver Co., 415 U.S. 36, 51-52 n. 15, 94 S.Ct. 1011, 1020-21, 39 L.Ed.2d 147 (1974), that an employee could not forfeit substantive rights under Title VII absent a voluntary and knowing waiver. In Pierce v. Atchison, Topeka & Santa Fe Ry. Co., 65 F.3d 562, 571 (7th Cir.1995), we applied the knowing and voluntary standard set out in Alexander to an employee's release of age and race discrimination claims against his employer. Thus, before an employee cedes a substantive right grounded in federal statutory law, she must understand and freely make the decision to do so.
Less clear is whether the right to have one's federal claims determined judicially rather than in an arbitration proceeding qualifies for this added protection. Compare Patterson v. Tenet Healthcare, Inc., 113 F.3d 832, 834 (8th Cir.1997) (applying ordinary contract principles in determining whether employee agreed to submit Title VII claims to arbitration), with Prudential Ins. Co. v. Lai, 42 F.3d 1299, 1305 (9th Cir.1994) ("[A] Title VII plaintiff may only be forced to forgo her statutory remedies and arbitrate her claims if she has knowingly agreed to submit such disputes to arbitration."), and Renteria v. Prudential Ins. Co., 113 F.3d 1104, 1105-06 (9th Cir.1997) (same). The Supreme Court has not reached this issue, but in dicta has stated that in agreeing to arbitrate a federal claim, a party "does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum." Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26, 111 S.Ct. 1647, 1651, 114 L.Ed.2d 26 (1991) (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628, 105 S.Ct. 3346, 3354, 87 L.Ed.2d 444 (1985)) (internal quotations omitted). Conversely, we have noted that "by being forced into binding arbitration [employees] would be surrendering their right to trial by jury — a right that civil rights plaintiffs ... fought hard for and finally obtained in the 1991 amendments to Title VII." Pryner v. Tractor Supply Co., 109 F.3d 354, 362 (7th Cir.1997), petition for cert. filed, 65 U.S.L.W. 3783 (U.S. May 16, 1997) (No. 96-1830), and petition for cert. filed, 66 U.S.L.W. 3108 (U.S. Jul. 18, 1997) (No. 97-123).
This issue is further complicated by the strong federal policy in favor of arbitration as embodied in the substantive provisions involved in this case. See Civil Rights Act of 1991, Pub.L. No. 102-166 § 118, 105 Stat. 1071, 1081 (1991) (not codified) (authorizing use of arbitration where appropriate to resolve disputes arising under certain federal statutes, including Title VII); 42 U.S.C. § 12212 (same for ADA); see also Federal Arbitration Act, 9 U.S.C. §§ 1 et seq. Thus, an employee's contractual agreement to submit her federal claims to arbitration implicates competing policy concerns.
The parties agree that an employee and employer may contractually agree to submit federal claims, including Title VII and ADA claims, to arbitration. See Gilmer, 500 U.S. at 35, 111 S.Ct. at 1656. An agreement to arbitrate is treated like any other contract. Kresock v. Bankers Trust Co., 21 F.3d 176, 178 (7th Cir.1994). If there is no contract there is to be no forced arbitration. Matthews v. Rollins Hudig Hall Co., 72 F.3d 50, 53 (7th Cir.1995); Farrand v. Lutheran Bhd., 993 F.2d 1253, 1255 (7th Cir.1993) (citing AT & T Techs., Inc. v. Communications Workers, 475 U.S. 643, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986)); Adamovic v. METME Corp., 961 F.2d 652, 654 (7th Cir.1992). In determining whether a valid arbitration agreement arose between the parties, a federal court should look to the state law that ordinarily governs the formation of contracts. 9 U.S.C. § 2; First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943, 115 S.Ct. 1920, 1924, 131 L.Ed.2d 985 (1995). In the present case, because Indiana was the situs of all relevant events in this dispute, we look to the contract law of that state. First Options of Chicago, 514 U.S. at 944, 115 S.Ct. at 1924.
Indiana courts apply ordinary contract principles to arbitration agreements. St. John Sanitary Dist. v. Schererville, 621 N.E.2d 1160, 1162 (Ind.Ct.App.1993); see also Gateway Coal Co. v. United Mine Workers, 414 U.S. 368, 374, 94 S.Ct. 629, 635, 38 L.Ed.2d 583 (1974); International Union of Oper. Eng'rs. v. Indiana Constr. Co., 910 F.2d 450, 453 (7th Cir.1990). Under Indiana contract law, the party seeking to compel arbitration has the burden of demonstrating the existence of an enforceable arbitration agreement. Wilson Fertilizer & Grain v. ADM Milling Co., 654 N.E.2d 848, 849 (Ind. Ct.App.1995). We note also that where, as here, the contract issue can be determined without resort to extrinsic evidence, the question is for the court and not a jury. Kokomo Veterans, Inc. v. Schick, 439 N.E.2d 639, 643 (Ind.Ct.App.1982); see also Coplay Cement Co., Inc. v. Willis & Paul Group, 983 F.2d 1435, 1438 (7th Cir.1993) (noting that federal courts applying state contract law follow state rules regarding assignment of duty of interpretation). The standard of review, which is determined as a matter of federal law, is de novo. Id. at 1438.
It is a basic tenet of contract law that in order for a promise to be enforceable against the promisor, the promisee must have given some consideration for the promise. See Shaw v. S.S. Kresge Co., 167 Ind.App. 1, 328 N.E.2d 775, 779 (1975); E. Allan Farnsworth, Farnsworth on Contracts § 2.2, at 61 (1990). Consideration is defined as bargained for exchange whereby the promisor (here Gibson) receives some benefit or the promisee (here NHC) suffers a detriment. B-Dry Owners Assoc. v. B-Dry System, Inc., 636 N.E.2d 161, 163 (Ind.Ct.App. 1994); Burdsall v. City of Elwood, 454 N.E.2d 434, 436 (Ind.Ct.App.1983). Thus, in order for Gibson's agreement to be enforceable, there must be detriment to NHC or benefit to Gibson that was bargained for in exchange for Gibson's promise to arbitrate all disputes.
In contrast to the one-sided obligation contained in the wording of the Understanding, the Manual contains language that arguably could be read to bind NHC. We conclude, however, that any promise NHC made in the Manual cannot serve as consideration for Gibson's promise to arbitrate. The absence of a meaningful link between Gibson's promise, contained in the Understanding, and NHC's obligation, set forth in the Manual, precludes reading these provisions as complementary components of a bargained for exchange. To be sure, contract terms may be incorporated by reference to a separate document, including an employee handbook, Orr v. Westminster Village North, Inc., 651 N.E.2d 795, 801 (Ind.Ct. App.1995), and consideration for the promise in one instrument may be contained in another, Goeke v. Merchants Nat'l Bank and Trust Co. of Indianapolis, 467 N.E.2d 760, 768 (Ind.Ct.App.1984). Nevertheless, whatever the physical form by which a contract is memorialized (if any), proper consideration must consist of benefit or detriment given in exchange for the promise in question. The principal purposes of this consideration requirement are the "cautionary function of bringing home to the promisor the fact that his promise is legally enforceable and an evidentiary function ... of making it more likely that an enforceable promise was intended." Scholes v. Lehmann, 56 F.3d 750, 756 (7th Cir.) (citing Lon Fuller, Consideration and Form, 41 Colum. L.Rev. 799 (1941)), cert. denied, ___ U.S. ___, 116 S.Ct. 673, 133 L.Ed.2d 522 (1995). Neither of these functions is served when a promisor does not know of the promise that purportedly serves as consideration. Here, Gibson was unaware of the terms of the Manual (even if the Understanding's reference to the Manual alerted her to its existence) at the time she signed the Understanding. The promise that she made in the Understanding, therefore, was not given in exchange for any promise that NHC made in the Manual. In addition, although the Manual contains language that could be read to bind Gibson as well as NHC, Gibson did not (even in the objective or constructive sense) assent to the terms of the Manual, either when she signed the Understanding (at which point the Manual was not made available), or when she received the Manual. Consequently, there is no promise on the part of NHC that can serve as consideration for Gibson's promise to arbitrate.
Nor was Gibson's promise to submit claims to arbitration supported by consideration in the form of NHC's promise to hire her or to continue to employ her, or by its reasonable reliance on her promise. An initial offer of employment may constitute consideration for an employee's promise,
Reversed and Remanded.
CUDAHY, Circuit Judge, concurring.
I agree that an employee cannot be bound to arbitrate his or her civil rights claims in the fashion presented here. In addition, there ought to be realistic requirements for achieving a valid arbitration agreement in the context of employment.
These requirements must recognize that we are dealing in most cases with a contract of adhesion: agree to arbitrate or lose your job. The majority appears to approve NHC's procedure of "the convening of a meeting and the presentation of the appropriate documentation." Maj. Op. at 1130. But we know nothing of what was said at NHC's meeting, not even whether consent to arbitration was imposed as a condition of further employment. And, apparently, the resulting arbitration "agreement" would consist of a patchwork of documents requiring some sophistication to interpret.
Returning to the case before us, I think it is unnecessary to explore all the relatively