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Here is how HR can help prevent the missteps that could cost your company big in court.
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The 6th U.S. Circuit Court of Appeals recently held that under Kentucky law, merely continuing to work for an employer constitutes assent to an arbitration agreement when that agreement is a condition of employment—even if the employee has not signed an acknowledgement form (Aldrich v. University of Phoenix, Inc., No. 16-5276 (unpublished, Oct. 24).
Marlena Aldrich and Kristin Nolan began working as recruiters for the University of Phoenix in 2005 and 2006, respectively. During Aldrich's and Nolan's employment, all University of Phoenix employees received an email notifying them that the employee handbook had been updated and requesting that they electronically sign forms acknowledging receipt of the handbook and acceptance of its terms.
The acknowledgement form included a statement "that the signatory understood and affirmed that both the signatory and the company 'would arbitrate employment-related legal claims.'"
The employee handbook separately detailed the arbitration terms and included a class action waiver. Notably, it also stated that acceptance of the agreement was a condition of employment. Both the email and the acknowledgement form included links to the handbook, which was also available on the company's intranet.
According to the University of Phoenix's records, Aldrich and Nolan both completed the electronic acknowledgement forms. Then they continued to work as recruiters for the company for about two years. Aldrich and Nolan claimed in affidavits filed with the court that they never received or signed the acknowledgment form.
After being discharged for failing to meet their recruitment goals, Aldrich and Nolan brought claims for wrongful termination and wage and hour violations against the University of Phoenix.
The U.S. District Court for the Western District of Kentucky granted the University of Phoenix's motion to dismiss the case and compel arbitration, finding that federal and Kentucky precedent treated acknowledgement forms as contractual agreements and that continued employment demonstrates assent to a contractual agreement under Kentucky law.
The district court also held that because the arbitration agreement was valid, the class waiver provision was likewise valid and the plaintiffs must pursue their wage and hour claims individually.
The 6th Circuit's Decision
The 6th Circuit affirmed the lower court's decision. Applying Kentucky law, the court reasoned that "an employee can be bound by an arbitration agreement, even without a signature, when he or she demonstrates acceptance of the agreement by continuing to work for the employer."
In this case, Aldrich and Nolan continued to work for the University of Phoenix after they had notice of the arbitration agreement, thereby accepting the agreement.
Despite the plaintiffs contending they never electronically signed the acknowledgment forms, the 6th Circuit emphasized that whether Aldrich and Nolan electronically signed the acknowledgement forms was irrelevant, because Kentucky law provides that an employee can be bound by an arbitration agreement, even without a signature, when he or she continues to work for the employer.
The 6th Circuit concluded by summarily disposing of Aldrich's and Nolan's argument that the arbitration agreement lacked consideration, noting that "continued acceptance of at will employment constitutes consideration under Kentucky law."
After a wave of attacks on arbitration agreements, the 6th Circuit's opinion in Aldrich should be a welcome relief to employers.
At the same time, the case is a cautionary tale to employers—particularly those in states where the law would not recognize acceptance of a contract by mere continued employment. The case also warns of evidentiary issues in relying on electronic signatures.
As a best practice, employers may want to:
Michael Oliver Eckard is an attorney with Ogletree Deakins in Atlanta and Charleston, S.C. KyraAnne Gates is a legal editor with Ogletree Deakins in Torrance, Calif.
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