Labor & Employment Law Daily Employee not compelled to arbitrate FLSA action; reviewing agreement on company network not acceptance
Wednesday, July 17, 2019

Employee not compelled to arbitrate FLSA action; reviewing agreement on company network not acceptance

By Marjorie Johnson, J.D.

Because the employee’s mere review of the arbitration agreement and its delegation clause did not evince an intent to accept the terms under Missouri law, no agreement to arbitrate was formed between the parties.

An employee was not required to arbitrate her collective FLSA action since there was no agreement to arbitrate between the parties, nor was a contract formed to delegate this decision to an arbitrator, the Eighth Circuit ruled, affirming denial of the employer’s motion to compel arbitration. Even if the employer could show there was an offer, no contract was created as to either provision since the employee’s review of the documents on the company’s computer network, and the subsequent system-generated acknowledgment, did not create an unequivocal acceptance (Shockley v. PrimeLending, July 15, 2019, Smith, L.).

Computer network contained agreement. The employer maintained a computer network accessible by its employees, which contained employment-related information. These accessible documents included the employee handbook, which contained a mandatory arbitration agreement that specifically included FLSA disputes as subject to arbitration. It also included a delegation provision stating that an arbitrator would have exclusive authority to resolve “any claim relating to the interpretation, applicability, enforceability or formation” of the arbitration agreement.

In August 2016, two months after being hired, the employee accessed this section of the network by using a computer mouse to click and open various company documents. She also completed the same process in the computer network in February 2017 as part of her required annual policy review. Clicking on the handbook in the system automatically generated an acknowledgment of review and that same click would have generated a pop-up window containing a hyperlink to open the full text of the handbook. However, the employee did not recall reviewing it and there was no evidence that she ever opened or reviewed its full text.

District court decision. After the employee brought this collective FLSA action alleging overtime violations, the employer moved to compel arbitration. The district court denied the motion based on its determination that there was no enforceable agreement. It held that furnishing an employee a handbook that could be modified unilaterally did not constitute an offer and that even if it did, merely reviewing the handbook did not constitute acceptance. The court reasoned that the employee should not be “compelled to proceed to arbitration in order to prove that she never agreed to arbitrate claims in the first place.”

Delegation provision. At the outset, the Eighth Circuit found that the delegation provision was crucial because if invalid, the employer could not compel arbitration of the arbitrability issue and the court could go on to review the challenged arbitration agreement’s validity. On the other hand, if the delegation clause was deemed to be a valid contract under Missouri law, the court’s inquiry would end, and all other questions would be required to go to an arbitrator.

Was it accepted? Assuming arguendo that the delegation provision did in fact constitute an offer, the Eighth Circuit focused on whether there was “positive and unambiguous” acceptance by the employee. And in Missouri, mere continued employment does not manifest the necessary assent to the terms of arbitration and silence is generally not deemed as acceptance. However, continued employment may constitute acceptance if the employer’s document clearly states that it will, and the employer informs all employees that continued employment constitutes acceptance. However, that did not happen here.

Acknowledged existence. The employee was presented with two opportunities to review the employee handbook through an optional hyperlink on the company network, and the initial review was not conditioned on her offer of employment. She did not remember reviewing the handbook nor did the record establish that she actually did so. Both times she opened the internal system containing the handbook, she was advised that by entering into the system she thereby acknowledged her review of these materials.

But no unequivocal acceptance. Though the employer could show that she acknowledged the existence of the delegation provision—and was thus aware of the terms of the purported contract offer—general awareness of the existence of a contract does not constitute the required “positive and unambiguous unequivocal acceptance.” Moreover, while she may have reviewed the delegation clause, it was also feasible that she never even saw it. In sum, even if the delegation provision constituted an offer, no contract was created since the employee’s document review and the subsequent system-generated acknowledgment did not create an unequivocal acceptance.

Arbitration provision. The terms of the arbitration provision—which was a standalone and independent contract from the delegation provision—were presented in the employee handbook by the same hyperlink mechanism. Therefore, it suffered from the same “fatal flaw” as the delegation provision and thus failed for the very same reasons. The absence of proof of unequivocal acceptance of an agreement to arbitrate rendered the provision unenforceable. Because the employee “did no more to accept the arbitration provision than she did to accept the delegation provision,” the Eighth Circuit held that the arbitration provision was not a validly formed contract due to a lack of acceptance.

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