Employee Didn't Agree to Arbitration Provision in Company Handbook

By Joanne Deschenaux December 7, 2018
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A former employee had not agreed to arbitrate employment disputes, even though the employee handbook contained a provision mandating arbitration, because the employee had not signed that page, a California appeals court ruled. The employee had signed a form acknowledging that he understood the employment policies outlined in the handbook, but that form did not mention arbitration, the court noted.  

The employer, a health care clinic, hired the plaintiff to be its chief financial officer in May 2016. He was terminated months later at the end of July. The plaintiff sued the clinic in December 2016, alleging that he was fired for protesting the company's discriminatory practices when hiring a human resources manager. He also alleged that the company withheld earned compensation to retaliate for his stand against age and race discrimination.

The clinic petitioned the trial court to compel arbitration in May 2017, but the trial court denied the petition because the clinic didn't show that the parties entered a valid arbitration agreement. The clinic appealed.  

No Agreement

The appeals court first noted that, although California law favors arbitration as a method for resolving disputes, it does not favor forcing people to arbitrate if they have not agreed to do so.

The employer had submitted three documents to support its argument that there was a valid agreement:

  • An offer of employment.
  • Two employee-handbook pages entitled "Mandatory Arbitration to Settle All Claims." The second page contained lines for a date and a signature, both of which were blank.
  • A handbook page that was signed by the plaintiff acknowledging that he understood the clinic's policies and agreed to abide by them.

The offer of employment did not mention arbitration. It set forth the plaintiff's base salary and hours of work and listed the benefits for which he was eligible. The employee indicated his acceptance of the offer "and the terms of the employment as set forth above" by signing at the end. The "terms of the employment" did not include arbitration, the appellate court noted.  

The two handbook pages relating to arbitration ended with lines for a date and an employee signature. Both lines were blank. The next-to-last paragraph stated, "This is the complete agreement between the parties on the subject of arbitration." The final paragraph stated, in all capital letters, "I acknowledge that I have carefully read this agreement, that I understand its terms and that, in the event of a dispute between me and my employer, binding arbitration shall replace any jury or other trial."

The appellate court concluded that the arbitration portion of the handbook was intended to be a stand-alone arbitration agreement, and the lack of an employee signature rendered the agreement unenforceable.

Unlike the arbitration pages, the acknowledgment page was signed and dated by the plaintiff. That page stated, "In reviewing the [company] handbook, I have read and understood its drug and alcohol-free workplace policy and the policy against harassment, including sexual harassment. I agree to abide by these and all other [company] policies. I understand that any violations of a [company] policy may result in serious disciplinary action, up to and including immediate termination."

The court noted that the acknowledgment section did not mention arbitration but referred instead to "policies" and "rules" and concluded that this document also did not show that the plaintiff had agreed to arbitrate employment disputes.

The court then said that although an arbitration agreement need not be signed to be enforceable, in the absence of a signed agreement, there must be other evidence that the employee agreed to arbitrate employment disputes. The court could find no such evidence in this case and affirmed the trial court's decision refusing to order arbitration.

Doan v. Nhan Hoa Comprehensive Health Care Clinic, Calif. Ct. App., No. G055323 (Nov. 26, 2018).

Professional Pointer: Although an arbitration agreement need not be signed to be enforceable, the employee's signature serves as evidence that he or she has in fact read the document and agreed to its terms. This should make enforcement easier in most cases.

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

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