Appellate Court Upholds Broad Scope of Arbitration Agreements

A California appellate court recently upheld an arbitration agreement contained within an employee handbook, even though the employee never signed the actual agreement.  The case reinforces the broad scope of arbitration agreements and underscores the importance of speaking with experienced counsel when presented with legal documents.

The case began when the plaintiff sued his former employer in Los Angeles Superior Court for racial discrimination, wrongful termination, failure to pay for overtime and rest breaks, and other related causes of action.

The employer moved to compel the case to arbitration.  It argued that, when the employee had been hired, he had acknowledged receiving an employee handbook containing an arbitration agreement and a separate document providing that all employment disputes would have to be arbitrated rather than litigated in court.  The trial court, however, denied the employer’s motion, keeping the case in court.

The decision was reversed by the California appellate court.

The appeals court cited to the strong policy favoring the enforcement of arbitration agreements.  The justices examined the paperwork the employee had signed when he was hired.  The court considered whether the paperwork demonstrated the employee had knowingly agreed to submit any subsequent dispute to arbitration.  The court focused on a form the employee had signed, whereby he acknowledged receiving both the employee handbook and a separate document providing that any disputes would be arbitrated.  The court concluded the employee consented to arbitration when he had signed the acknowledgement form, even though he never signed the document containing the arbitration agreement.

The employee unsuccessfully argued that, regardless of what was contained in his acknowledgement, he did not know that the paperwork he received contained an arbitration agreement. According to the court, it was “legally irrelevant” whether the employee actually read the documents or not; his written acknowledgement was sufficient to enforce the arbitration agreement.

The case is Harris v. Tap Worldwide, LLC, 248 Cal. App. 4th 373, 382, 203 Cal. Rptr. 3d 522, 529 (2016).

Lessons to be Learned

This case underscores the broad scope of arbitration agreements in California.  It also reinforces the long-standing rule that a party to a contract cannot later avoid the obligations of the contract by claiming they did not read or understand the document.  For these reasons, it is advisable to speak to an attorney before signing any legal document, whether in the context of an employment relationship or otherwise.

Law Offices of Robert L. Hill, APC

The Law Offices of Robert L. Hill counsels individuals, businesses, and corporations in a diverse range of litigation and transactional matters.  Mr. Hill has extensive experience litigating and arbitrating complex business disputes throughout California.  The firm is located in Carlsbad, California, serving clients throughout the state.