Employee Who Continued to Work Consented to Arbitration

 

By Joanne Deschenaux April 29, 2019
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Employee Who Continued to Work Consented to Arbitration

An employee who was told that agreeing to arbitrate disputes was a condition of employment but who refused to sign the agreement and continued to work for the employer implied her consent to arbitration, a California appeals court ruled. Therefore, the employee was required to arbitrate her workplace-discrimination claims.

On Dec. 2, 2016, the employee and her co-workers received notice at an in-person meeting that the company was adopting a new dispute resolution policy requiring arbitration of all claims. The company's chief operating officer told employees that even if they refused to sign the agreement, continued employment would constitute acceptance of its terms. All employees received a copy of the agreement to review at home.

On Dec. 19, company representatives met privately with the employee, who had indicated to the company's HR director that she did not wish to sign the agreement. They advised her again that continuing to work implied acceptance of the agreement.

On Dec. 23, the employee and her lawyer gave the company a letter dated Dec. 20, rejecting the agreement but indicating that the employee intended to continue her employment. On the same date, she also filed a complaint in court alleging workplace discrimination.

On Jan. 17, 2017, the company sent a demand for arbitration to the employee's lawyer. The lawyer did not reply. The company filed its motion to compel arbitration in April. The trial court heard arguments and denied the motion.

The company appealed.

Consent to Arbitration

The appellate court first noted that, when presented with a petition to compel arbitration, the initial issue before the court is whether an agreement has been formed.

The party seeking to compel arbitration bears the burden of proving the existence of the agreement, the court said, finding that, in this case, the company had met its burden.

California law in this area is settled, the court said. When an employee continues to work after being notified that arbitration is a condition of continued employment, his or her consent is implied.

The evidence shows that the employee stayed in her job between Dec. 2 and Dec. 23. As a result, she was already bound by the arbitration agreement before she presented the letter indicating that she was rejecting the agreement and that she planned to stay employed, the court said.

Because the plaintiff's employment was at will—meaning that she or the employer could end the relationship at any time and for any lawful reason—the company could change the terms of her employment agreement if it provided notice.

Enforceable Agreement

Once the party seeking arbitration has established that a binding agreement was formed, the burden shifts to the party opposing arbitration to demonstrate that the agreement cannot be enforced.

[SHRM members-only HR Q&A: What are the California rules regarding mandatory arbitration agreements, and how do they differ from federal law?]

A showing that an agreement is unconscionable—or shockingly unfair to one party—can bar enforcement, the court noted. An agreement may be procedurally unconscionable if the parties have unequal bargaining power, whereas an agreement may be substantively unconscionable if the terms are overly harsh or one-sided. Both elements must be present for a court to refuse enforcement.

Although the court did find procedural unconscionability in the "take it or leave it" way the agreement was presented to the employees, it found no evidence that the terms of the agreement were unfair, and so found no evidence of substantive unconscionability.

The court therefore reversed the trial court's order, ruling that the employee must arbitrate her claims.

Diaz v. Sohnen Enterprises, Calif. Ct. App., No. B283077 (April 10, 2019).

Professional Pointer: In general, an employer can fire an at-will employee who refuses to sign an arbitration agreement. In this case, the employee was not fired, but she was bound by the agreement she had refused to sign.

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

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