Arbitration agreements, and their use as a means to avoid class action disputes in particular, have been repeat news items in the last several years, and many employers continue to consider their use as a means to mitigate employment and wage and hour class action litigation risk. For employers who have implemented such agreements, a recent federal court decision reminds them of a seemingly simple – but nonetheless critical – point: make sure if you have an arbitration agreement, employees sign on to it and you can demonstrate an employee’s assent to the agreement if you need to do so, because as the court indicated, employers cannot rely on general policies requiring employees to sign such agreements to compel arbitration if the employees have not actually signed them.
In the case, the employer moved to compel arbitration, noting that the representative employees had signed arbitration agreements, and asked the court for a ruling that individual arbitration – as opposed to class arbitration – was appropriate. All but a handful of the class members went to individual arbitration proceedings, but the employer could not locate signed arbitration agreements for those few members of the class. The employer told the court, by way of a declaration, that the employees “must have signed the agreements” because doing so was required by company policy and asked the court to find that the employees “bear the burden to create a genuine issue as to the existence of the arbitration agreement.”
The court noted, however, that the state of the law requires that the employer bear the initial burden to show there is a written agreement bringing the dispute under the Federal Arbitration Act. Only after the employer does so will the employees then have a burden to show they did not agree to the purported written agreement. As a consequence, the court rejected the employer’s attempt to compel arbitration for three of the employees who had brought the wage dispute against the company. According to the court, it simply “will not order plaintiffs to arbitrate when there is essentially zero evidence that they ever even saw, let alone assented to, an arbitration agreement.”
While it may seem like a fairly obvious point, the case nonetheless reminds employers of the importance of dotting all the I’s and crossing all the T’s when it comes to read-and-sign policy documents, and in particular arbitration agreements when large class action liability could be at stake. The decision also reminds employers that it is also prudent to maintain arbitration agreement signature pages and other policy documents as part of employee personnel files so they can be easily located and referenced to ensure the employee has signed what the employer thinks he or she has signed. These seemingly small steps can make critical differences later on when significant economic consequences can ride on how good an employer’s recordkeeping has been.