Employer Failed to Prove Existence of Arbitration Agreement

An employee who sued her employer for discrimination, retaliation and failure to provide reasonable accommodations could not be forced to arbitrate her claims because the employer failed to prove the existence of an arbitration agreement, a California appeals court ruled. Under California law, the burden is on the employer to show that a valid arbitration agreement existed, and the employer failed to meet that burden, the court said.  

The employer, a medical clinic, hired the employee as a scanner in May 2018. As a condition to beginning her employment, the employee signed several onboarding documents. In July 2018, the employee sustained an injury to her hand that affected her work. The clinic terminated her employment after she requested medical accommodations.

The employee sued the clinic, and the clinic subsequently filed a motion to compel arbitration. The clinic argued that the employee had signed an arbitration agreement as part of her required onboarding documents. The clinic's HR director filed a declaration stating that the worker had signed an arbitration agreement and attached the agreement as an exhibit to her declaration. The arbitration agreement appeared to be signed by a representative of the clinic and an employee.

The employee opposed the motion, arguing that the clinic had not established that it had a valid arbitration agreement with her. She filed a declaration stating that she had reviewed the arbitration agreement attached to the HR director's declaration but did not remember the document. She said that, before the case, no one had ever told her about an arbitration agreement or explained what it was. She said if she had known about the arbitration agreement and had been told about its provisions, she would not have signed it.

The clinic argued that the employee's failure to remember the arbitration agreement did not invalidate the agreement.

The trial court ruled that the HR director's declaration was not admissible evidence and that the clinic had not shown that a contract was formed. It denied the clinic's motion to compel arbitration, and the clinic appealed.

Court Must Find Arbitration Agreement Exists

Under California law, a trial court must grant a motion or petition to compel arbitration only if it determines that an agreement to arbitrate the controversy exists. The party seeking arbitration must prove the existence of the agreement, the appellate court explained.

The party seeking arbitration must first produce evidence of a written agreement to arbitrate the controversy, complete with the opposing party's signature. If the opposing party disputes the existence of the agreement, the opposing party must then produce evidence to challenge the document's authenticity.

The opposing party can challenge the document's authenticity in several ways, the court said. For example, the opposing party may testify under oath that he or she never saw or does not remember seeing the agreement or that he or she never signed or does not remember signing the agreement.

Then, the party seeking arbitration must establish a valid arbitration agreement between the parties.

Here, the employee challenged the agreement, saying under oath that she did not remember it. The clinic presented no evidence that the employee saw or signed the arbitration agreement because the trial court refused to consider the HR director's declaration, the appeals court said.

The trial court acted properly in excluding the clinic's evidence, according to the appeals court. Although the director claimed that the employee signed the agreement, she did not say that she had personal knowledge of the signing. The declaration stated only that the worker was employed by the clinic for about two months, that she had signed the agreement and that the agreement was in effect during the worker's employment.

Also, the employer never sought to introduce any other evidence that the arbitration agreement was authentic. California law requires that written documents be "authenticated" by some proof that the document is what the person offering the document says it is.

In conclusion, the court said, once the employee produced evidence challenging the authenticity of the agreement, the clinic was required to establish that the agreement was valid. The clinic did not have to authenticate the employee's signature on the arbitration agreement but could have met its burden in other ways. For example, the clinic's custodian of records could have submitted a declaration. But the clinic did not offer any admissible evidence.

Thus, the appellate court affirmed the trial court's order denying the clinic's motion to compel arbitration.

Gamboa v. Northeast Community Clinic, Calif. Ct. App., No. B304833 (Nov. 30, 2021).

Professional Pointer: A California law originally set to take effect in 2020 would have prohibited employers from requiring workers to arbitrate state-law discrimination and labor code claims. A federal court prevented the law from taking effect initially, but a September 2021 federal appellate court decision upheld the law (Chamber of Commerce v. Bonta). This ruling is currently being challenged, and for now, the trial court's decision enjoining enforcement of the law remains in effect. In the meantime, employers are encouraged to consult with counsel regarding their arbitration agreements.

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