By Carolina A. Schwalbach, Carothers DiSante & Freudenberger LLP
In 2011, the U.S. Supreme Court held class arbitration waivers to be enforceable, and since then, many arbitration agreements have been modified to include such waivers. Doing so has allowed employers to streamline the resolution of disputes that otherwise would be in an overburdened court system for years.
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However, a recent decision sheds light on challenges employers continue to face in seeking to keep class actions out of the courts and serves as a reminder of how California employers can take proactive steps to ensure their arbitration agreements are fully enforceable, including class and collective action waivers.
Court Finds Agreement Enforceable
Denise and Kathy Licon both worked for Wish-I-Ah Skilled Nursing & Wellness Centre LLC for years before their employment came to an end and they decided to file suit against their former employer.
When she was hired, Denise signed a 1-page document called the employment dispute resolution (EDR) program agreement. The agreement clearly stated that should she wish to be considered for employment, she was to read, sign, and agree to the terms of the EDR program.
Denise signed the agreement and acknowledged that she was bound to use the EDR program as the only means of resolving employment-related disputes. But it wasn’t until weeks later that she also signed an acknowledgment verifying that she received a copy of the 2007 EDR program booklet, which actually described the EDR program.
Years later, when she filed the lawsuit against her employer, Denise challenged the arbitration agreement, arguing it was unenforceable because at the time she signed it, she wasn’t provided a copy of the EDR program booklet.
However, relying on Craig v. Brown & Root, Inc. (holding that an arbitration agreement was enforceable when it was mailed to the employee’s home address on two occasions despite the employee’s denial of receiving it), the court held that the signed EDR program agreement was sufficient to bind Denise to arbitration because she was put on notice of the terms of the EDR program when she later received the program booklet and chose to continue her employment.
Kathy began her employment with the company in 1979, presumably many years before the existence of any arbitration agreements. But in 2009, she signed an EDR program acknowledgment confirming that she received the 2007 EDR program booklet. While the acknowledgment didn’t confirm her agreement to arbitrate, it provided that “your decision to apply, accept employment, or to continue employment with the Company constitutes your agreement to be bound by the EDR Program.”
Therefore, the court held that, as in Craig, Kathy was on notice of the EDR program and its terms, and by continuing to work for the company, she had implicitly agreed to be bound by the program’s terms.
While the employees disagreed with the court’s decision to enforce the arbitration agreements, the crux of the dispute was whether the employees, through their acceptance of the EDR program, agreed to waive their right to file a class and/or collective action.
Read on for more details.