Mixed Signals from Federal Courts on How Employers May Implement Mandatory Arbitration for Employees
Of late, mandatory arbitration for employees has been a hot legal topic. As we have discussed on this blog, employers have good reasons for seeking to implement arbitration. Arbitration helps reduce the litigation costs and risks of employee-initiated lawsuits, helps minimize negative publicity (because arbitration is typically confidential and non-public), and helps employers avoid class action lawsuits.
One of the more complex issues is how employers can implement mandatory arbitration for their existing employees. Broadly speaking, the legal question is one of contract formation. The issue is easy with new hires: the new employee is required to sign a contract or agreement that provides for mandatory arbitration in the event of disputes. However, what about existing employees?
The issue seemed resolved by the US Supreme Court’s decision in Epic Systems v. Lewis, Case No. 16-285 (May 21, 2018). That case held that the employers can require their employees to agree to mandatory arbitration and can also require their employee to waive their rights to file class actions.
With regard to implementing mandatory arbitration for existing employees, Epic Systems seemed to approve of the following method of obtaining employee consent:
- Broadcasting an email to all employees announcing the new company arbitration provision and attaching the agreement and
- Requiring employees to sign off on the attached agreement and
- Stating that an employee’s continuing to work for the company would constitute consent to the new arbitration agreement
See Epic Systems, dissenting opinion, fn. 2 (Ginsburg).
Since Epic Systems was decided in 2018, employers have been receiving mixed signals from the federal courts with respect to how new arbitration policies can be implemented. For example, the US federal court sitting in Washington, D.C., recently rejected the above-described method. See Jin v. Parsons Corp., Case No. 1:18-cv-02222 (TNM) (US Dist. D.C. January 29, 2019). In that case, the employer, Parsons Corporation, established an Employee Dispute Resolution program in 1998, which included an Agreement to Arbitrate. Parsons updated the arbitration agreement in 2012. In doing so, Parsons emailed all of its employees telling them about the updated arbitration agreement and asking them to complete a certification acknowledging receipt of the Agreement. The email also stated that that employee’s continued employment with Parsons would constitute acceptance of the updated arbitration terms. This is the method seemingly approved by Epic Systems.
Parsons went further and sent three follow-up “Reminder” emails containing the same information in the following weeks, all in October 2012.
In 2018, an employee, Jin O. Jin, was fired and he sued claiming age discrimination. Parsons sought to compel arbitration pursuant to the Agreement to Arbitrate. Mr. Jin never signed the 2012 updated policy and never responded to any of the four emails received in October 2012. Mr. Jin argued that he had never agreed to arbitrate and that he should not be compelled to arbitration.
Despite Epic Systems, the trial court agreed and refused to send the case to arbitration. The trial court acknowledged that sometimes actions can be considered evidence of consent. The court further acknowledged that a signed agreement to arbitrate was not always necessary. But the court rejected the idea that continuing to work for a company was sufficient to hold that the employee had consented.
Two key lessons can be drawn from the disparity between Epic Systems and Jin. First, do not assume that courts will agree that the Epic Systems method of obtaining employee agreement will succeed, particularly here in California. California courts are hostile to mandatory employee arbitration. Second, contract compliance, management, and tracking are important. Someone in the legal department or human resources should be tasked with verifying which employees have “signed off” and which have not. An experienced San Diego corporate lawyer can help with this process. Face-to-face meetings should be instituted with the non-complying employees. In the Jin case, the employee claimed that he did not know about the arbitration agreement despite the four emails. That was a key fact for the judge. A face-to-face conversation removes that factual issue and legal challenge even if an employee still refuses to sign the new arbitration agreement.
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For more information, call corporate attorney Michael Leonard, Esq., of San Diego Corporate Law. Call Mr. Leonard at (858) 483-9200 or contact him via email. Mr. Leonard has been named a “Rising Star” four years running by SuperLawyers.com and “Best of the Bar” by the San Diego Business Journal. Mr. Leonard’s law practice is focused on business, transactional, and corporate matters and he proudly provide legal services to business owners in San Diego and the surrounding communities. Like us on Facebook.