California Court of Appeal Upholds Arbitration Agreement Despite Employee’s Refusal to Sign It

One problem that employers frequently confront when seeking to compel arbitration of employee claims is the employee’s failure to have signed the arbitration agreement.  In the recent case of Harris v. TAP Worldwide, LLC, however, a California appellate court held that this is not an impediment to the enforcement of such an agreement when the employer takes measures to verify that the employee has received it before a lawsuit is filed.

In Harris, an employee, Dwayne Harris (“Harris”) signed acknowledgements of receipt of both TAP Worldwide, LLC (“TAP”) Handbook and its arbitration agreement, but did not sign the agreement itself.  The court concluded that this did not bar enforcement of the agreement when the agreement expressly stated that “If the Employee voluntarily continues his/her employment with TAP after the effective date of this Policy, Employee will be deemed to have knowingly and voluntarily consented to and accepted all of the terms and conditions set forth herein without exception.”  The Employee Handbook also provided that execution of that Agreement was a “prerequisite to your hiring” and that “If for any reason, an applicant fails to execute the Agreement to Arbitrate yet begins employment, the employee will be deemed to have consented to the Agreement to Arbitrate by virtue of receipt of this Handbook.”  Distinguishing these provisions from handbook language in other cases which clearly contemplated that the employee would sign a separate arbitration agreement, the court found that it was sufficient to require arbitration of the employee’s discrimination and wage/hour claims.

The Harris court also held that the arbitration agreement was enforceable notwithstanding language in the accompanying Handbook that the Employer could unilaterally modify the policies contained in it.  Rejecting the employee’s claim that this made the agreement “illusory” and unenforceable, the court noted that the Arbitration Agreement contained separate language stating that it could only be modified in a writing signed by both parties.  Even so, the court noted that a unilateral right to modify a contract is not fatal to its enforcement if the exercise of the power is subject to limitations “such as fairness and reasonable notice.”  This holding is also beneficial to enforcing agreements containing the right to modify, which most frequently appears in handbooks and policy manuals containing a “dispute resolution policy.”

This is a favorable decision for employers.  Employers should consult with their AALRR attorney or employment counsel to review their arbitration agreements, as arbitration is a frequently changing area of the law.

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