Wage Law

Telling employees that they will be required to sign an arbitration agreement as a condition to employment is not enough to establish such an agreement, and the failure to produce the signed agreement is fatal to a petition to compel arbitration, according to a holding published by the Fourth District Court of Appeal in Mitri v. Arnel Management (2007) __ Cal.App.4th __. In Mitri, the plaintiffs sued their former employer and others for sexual discrimination and harassment, among other things. The defendants filed a motion to compel arbitration, asserting that the plaintiffs had each entered into a binding arbitration agreement. The trial court denied the motion based on the defendants’ failure to prove the existence of any such agreement to arbitrate. The Court of Appeal affirmed.

Arnel’s employee handbook states, “[a]s a condition of employment, all employees are required to sign an arbitration agreement” and further states, “[e]mployees will be provided a copy of their signed arbitration agreement.” Defendants have not produced evidence of signed arbitration agreements. Defendants nevertheless contend the handbook’s reference to arbitration is sufficient to force plaintiffs to arbitrate their claims. [This] argument is wholly without factual or legal merit.

The employer's evidence was an employee handbook that stated: “Any dispute arising out of employment with the Company, as allowed by law, will be settled by binding arbitration. As a condition of employment, all employees are required to sign an arbitration agreement. [¶] To ensure the expeditious and economical resolution to any controversy or dispute arising from, or in any way relating to an offer of employment or the position, work, payment or relationship, or the termination of such employment, will be on the written request by any party, be submitted to and resolved by binding arbitration. Said arbitration will be conducted by the American Arbitration Association in Orange County, California. The Company will share equitably such expenses associated with the arbitration process. The prevailing party in the arbitration shall be awarded its attorney’s fees incurred in the arbitration process and the decision of the arbitrator shall be final, 4 binding and non-appealable. [¶] Further, nothing in this policy is intended to prevent either you or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration. You, as the employee and the Company each have the right to resolve any issue or dispute involving company trade secrets, invention rights, non-competition and non-solicitation by court action in lieu of arbitration. [¶] Employees will be provided a copy of their signed arbitration agreement.”

There was no “signed arbitration agreement” presented to the court.

The employees' evidence consisted of declarations in which they denied entering into an arbitration agreement or ever being asked to do so. Both admitted “signing a receipt for the Arnel Management Company’s Policy Handbook,” but each stated, “I was not asked to read, nor was I given time to read, the Arnel Management Company’s Policy Handbook and I did not know its contents.”

The court found that the parties clearly did not intend that the handbook constitute a binding agreement, and that there was no evidence that the agreement ever came to fruition.

The arbitration agreement provision [in the handbook] also states that pursuant to Arnel’s policy, “[a]s a condition of employment, all employees are required to sign an arbitration agreement.” This provision completely undermines any argument by defendants the provision in the handbook itself was intended to constitute an arbitration agreement between Arnel and its employees. ... The provision further states, “[e]mployees will be provided a copy of their signed arbitration agreement”—thus reinforcing an intent to have employees sign a separate arbitration agreement to effectuate Arnel’s policy of arbitrating employment claims. Defendants have not produced any evidence of the existence of such an arbitration agreement signed by either plaintiff.

On these facts, the court distinguished several cases finding an agreement to arbitration, including Asmus v. Pacific Bell (2000) 23 Cal.4th 1, DiGiacinto v. Ameriko-Omserv Corp. (1997) 59 Cal.App.4th 629 and Craig v. Brown & Root, Inc. (2000) 84 Cal.App.4th 416.

You can download the full text of Mitri v. Arnel Management here in pdf or word format.