New Employee Handbook Did Not Rescind Previously Signed Arbitration Agreement

​An employer's issuance of a new employee handbook did not change an employee's obligation to arbitrate workplace disputes, a California appeals court recently ruled. Although the employee did not sign the new arbitration agreement contained in the new handbook, the agreement he had previously signed remained in effect, the court ruled.

The plaintiff worked for a Rancho Dominguez, Calif.-based seafood supplier for more than a decade as an at-will employee. He was promoted during his tenure but alleged that the employer told him he would not become a senior manager because "he was an old white man and not an Italian." The employer fired the employee in 2022, allegedly in retaliation for his complaints that it mislabeled seafood sold to its customers, sexually harassed female employees and committed insurance fraud.

Was Arbitration Agreement Canceled?

The employee sued the employer, alleging discrimination, wrongful termination in violation of public policy, and retaliation for whistleblowing. The employer sought to compel arbitration of the employee's complaint, arguing that the employee was bound by an arbitration agreement he signed in 2009. He was also subject to a 2011 employee handbook, which required arbitration.

The arbitration agreement the employee signed in 2009 requires arbitration of all workplace disputes and provides that arbitration is the parties' exclusive remedy and is binding. The employee, however, refused to agree to arbitration of his claims, alleging that the employer revised its arbitration agreement in 2011, and he did not sign the revision. The employer asserted that the earlier agreement was not invalidated merely because other workers signed a different arbitration agreement starting in 2011.

The employee argued that the 2011 handbook "canceled the previous arbitration agreements." He did not sign a new arbitration agreement in 2011 or afterwards.

The trial court denied the employer's motion to arbitrate, ruling that although the employee signed the original agreement, he never signed a new agreement, and therefore there was no new contract. The new handbook "canceled" the previous agreement "and required existing employees to sign a new 2011 arbitration agreement, which wasn't done in this case," the trial court said. The employer appealed.

Parties Agreed to Arbitrate Disputes

Public policy strongly favors contractual arbitration as an expedient means of dispute resolution, and there is therefore a presumption in favor of arbitrability, the appeals court noted. The policy favoring arbitration, however, does not extend to parties who have not agreed to arbitrate.

The threshold question is the existence of an agreement to arbitrate, and general principles of contract law determine whether the parties have entered a binding agreement to arbitrate, the court further explained.

The 2011 handbook did not invalidate the prior arbitration agreement that the employee signed, the court said. He signed the agreement in 2009, expressly consenting to arbitration.

By its terms, the handbook supersedes prior "policies, procedures, rules, regulations, commitments and practices" of the company, the court said. It does not supersede signed, mutual agreements or support the employee's claim that it expressly stated that all previous agreements between the employer and the employee were superseded. The agreement is thus not nullified by the handbook, the appeals court said.

Furthermore, the court continued, the handbook perpetuated the employee's duty to arbitrate. The employee conceded that his employment was subject to—and his continuing employment conditioned on—the terms of the 2011 employment manual. He insisted, however, that since he did not sign the arbitration agreement contained in the  manual, he did not agree to it. Although he failed to sign anything, the employee implied his acceptance of arbitration by continuing to work at the company, the court said.

An agreement to arbitrate may be express or implied, so long as it is written, the court noted. Anyone who accepts employment under the terms of an employee handbook assents to those terms.

The seafood company has required arbitration of disputes since the employee started employment in 2008, the court said. He executed the agreement to arbitrate in 2009. Likewise, the handbook requires arbitration of disputes. The employee worked for the company for 14 years, all the while subject to arbitration under the agreement and the handbook. His assent to arbitration was express (under the agreement) and implied when he continued to work at the company for over a decade after the handbook was modified.

The court reversed the trial court's decision and ordered arbitration of the employee's claims.

Theobald v. Santa Monica Seafood Co., Calif. Ct. App., No. B324090 (Aug. 25, 2023).

Joanne Deschenaux, J.D., is a freelance writer in Annapolis, Md.