Authors:
Since the United States Supreme Court’s decision in AT&T Mobility v. Concepcion,
more and more employers have sought to get out of court and into
arbitration when dealing with employee disputes. The California Courts
of Appeal, however, are not making that easy when it comes to an
employer’s burden to show the existence of a valid agreement to
arbitrate. Several months ago, the Second Appellate District held in Sparks v. Vista Del Mar Child and Family Services
that an arbitration policy in an employee handbook was not enough to
force arbitration. Similar decisions have reached the same conclusion, e.g., Carey v. 24 Hour Fitness USA, Inc., (5th Cir. Jan. 25, 2012).
Hot on the heels of the Sparks decision, the Second District took it one step further on October 16, 2012, holding that an unsigned arbitration
agreement is not enforceable even where the employee was aware of the
agreement, that she was required to sign the arbitration agreement as a
condition of continued employment, was an officer in charge of
implementing the arbitration agreement company-wide, and actively misled
the employer into believing she had actually signed the arbitration
agreement.
The plaintiff (Gorlach) was the Human Resources Director for The
Sports Club Company (Sports Club) until she resigned in August 2010. In
the months prior to her resignation, Sports Club created a new
arbitration agreement that was to be a required term for all employees,
including executives. Sports Club tasked Gorlach with implementing and
collecting signed arbitration agreements, and she led Sports Club
executives to believe that she had signed the arbitration agreement, but
she never did. Instead, after quitting, Gorlach sued Sports Club for
wrongful termination, retaliation, and paramour sexual harassment, among
other claims.
Sports Club’s efforts to compel arbitration were denied at the trial
court, which found that even though Gorlach had intentionally misled the
company to believe she had signed the agreement, without a written
agreement the trial court could not compel arbitration under the
California Arbitration Act, which requires among other things a “written agreement”.
The Court of Appeal affirmed. First, it held Gorlach was not equitably
estopped from denying the existence of the arbitration agreement
because there was no evidence that Sports Club relied to its detriment
on Gorlach’s implied representations that she had signed the arbitration
agreement. At the time Gorlach resigned, Sports Club was still rolling
out the arbitration agreement, had not yet decided what to do if an
employee refused to sign it, and had not terminated any non-signing
employees. So there was no reason to believe that Sports Club would have
terminated Gorlach prior to her resignation date if it knew she had not
signed the agreement. Second, the appellate court held that there was
no implied-in-fact arbitration agreement between the parties because
there was no evidence that Gorlach ever intended to enter into the
agreement. Gorlach’s refusal to sign the arbitration agreement, despite
Sports Club’s requirement that she do so as a condition of employment,
demonstrated that she did not intend to be bound by it. Conversely, a
signed agreement would likely have resulted in arbitration being
compelled.
The case is Gorlach v. The Sports Club Company.
Source: http://www.jdsupra.com/legalnews/california-court-of-appeal-employer-can-53530/
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