Employee Handbook Acknowledgment Language Is Critical To Arbitration Enforcement

In a recent decision, the California Court of Appeals for the Second District affirmed the denial of an employer’s motion to compel arbitration in spite of the fact that the employee handbook contained a detailed arbitration clause.  The case is Esparza v. Sand & Sea (Aug. 22, 2016).  In Esparza, the employee had received an employee handbook containing the standard language that the handbook did not constitute a contract express or implied.  This language is standard in employee handbooks in order to avoid the argument that the handbook constitutes an employment contract and thus transforms the employment relationship from at will to contract.

The handbook contained, among other policies, a two page “Agreement to Arbitrate” that was set out in all capital letters.  An acknowledgement signed by the employee was contained at the end of the handbook.  It read: “I acknowledge that I received Sand & Sea Inc.’s {Shore Hotel) Employee Handbook.  I also acknowledge that I am expected to have read the Employee Handbook in its entirety no longer after one week after receiving it, and that I have been given ample opportunity to ask any questions I have pertaining to the contents of the employee handbook.”  Nowhere was the employee asked to acknowledge that in receiving the handbook and accepting employment, she was agreed to and be bound by all of the policies contained therein.

The Court affirmed the trial court’s denial of the employer’s motion to compel arbitration, reasoning that there was nothing in the handbook that gave the employee notice that by executing the acknowledgement she was agreeing to arbitrate future employment disputes.

The Court specifically distinguished the recent appellate decision in Harris v. TAP Worldwide that was successfully argued by FLG attorney Rachel Stanger (here).  The employee handbook utilized by the defendant in Harris (which was prepared by FLG) contained specific language that “[I]f Employee voluntarily continues his/her employment with TAP Worldwide, LLC after the effective date of this Policy [or January 1, 2010], Employee will be deemed to have knowingly and voluntarily consented to and accepted all of the terms and conditions set forth herein without exception.”  According to the Court in Esparza, “No such contractual language existed here.”

While employee handbooks have become a standard part of most employers’ new hire packets, the law concerning these instruments is constantly evolving.  FLG regularly litigates labor and employment issues for clients.  FLG attorneys also assist clients with Human Resources Management by preparing employment packets that include handbooks, arbitration agreements and the like.

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