In grade school, we are taught that our signature is one of our most valuable assets. We also learn that if you sign a document without reading it, you may be binding yourself to a contract you don't like. That's exactly what happened in a recent Court of Appeal decision.
On August 26, 2020 the California Court of Appeals issued a very employer-friendly decision regarding the enforcement of employee arbitration agreements. The court ruled that an employee could be forced to arbitrate a dispute with his former employer even though the employer never alerted the employee that the handbook he signed for obligated him to arbitrate all disputes with his employer. The court said this was true even where the arbitration clause was a non-negotiable term of employment and the company maintained the unilateral right to modify the handbook.
Michael Conyer (“Conyer”) was hired by Hula Media Services (“Hula”) as a facility manager and senior engineer. At the time of hire, Conyer received and signed for a copy of the company's employee handbook. The handbook did not contain an arbitration clause, but the receipt and acknowledgement he signed when given the handbook stated that his employer had "the right to amend, modify, rescind, delete, supplement, or add to” the handbook. And, that's exactly what happened.
After Conyer complained about sexual harassment and retaliation by Hula’s CEO, the company distributed a revised employee handbook which now included an arbitration clause. Conyer signed a receipt and acknowledgement for the revised handbook. Some time after that, he left the company and sued the CEO and Hula for sexual harassment and various other claims. His employer contended that Conyer must arbitrate the claim under the new arbitration clause in the updated handbook because Conyer signed for it when it was issued.
The trial court denied the Company's motion to force the claim into arbitration, stating that the receipt and acknowledgement for the new handbook did not indicate that arbitration had been added to the new handbook. The Company appealed that ruling and the appellate court sided with the employer, even though the new provision was never highlighted or discussed when the revised handbooks were distributed. Here is why.
The appellate court noted that it was unreasonable for the employee not to have read the new handbook. The receipt and acknowledgement that he signed proved that he'd been given a copy and obligated him to familiarize himself with its contents. The Court went on to say that the Company was under no obligation to even call the arbitration clause to the employee's attention.
While the court upheld the Company's right to force Conyer to arbitrate his claims, it struck down another provision calling for the parties to split the cost of the arbitration or force the loser to pay the winner's legal fees. Under California discrimination law, it is illegal for an employer to require employees to pay the other side's attorney's fees or any other expense that would make arbitration more expensive than going to court.
For employers, this is a good case. The Court's common sense decision that willful ignorance of company policy will not be a defense is good for all. Thus, employees who chose not to read important company policy documents will be held accountable for their decision because a company is not legally obligated to call out changes to policy when furnishing employees with a copy.
If you have any questions about the matters discussed in this issue of Compliance Matters, please call your firm contact at (818) 508-3700 or 704-765-1409, or visit us online at www.brgslaw.com.
Richard S. Rosenberg
Katherine A. Hren
Charles H.W. Foster
Ballard Rosenberg Golper & Savitt, LLP