Employment Law Daily Employer can’t enforce arbitration agreement it failed to sign
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Thursday, June 14, 2018

Employer can’t enforce arbitration agreement it failed to sign

By Ronald Miller, J.D.

Finding that the express language of an arbitration agreement required for it to be signed by both parties and because it is undisputed that an employer did not sign the agreement, the Fifth Circuit reversed a district court’s judgment compelling an employee to arbitrate her claims. Although Texas courts have held that a signature block by itself is insufficient to establish the parties’ intent to require signatures, in this case, there was more than a blank signature block that spoke to the parties’ intent. The agreement also contained language that the parties needed to sign the agreement to give it effect or to modify it (Huckaba v. Ref-Chem, L.P., June 11, 2018, Elrod, J.).

When the employee sued her former employer, the employer moved to dismiss and compel arbitration. In support of its motion, the employer provided the district court with an arbitration agreement that had been signed by the employee. However, the signature block for the employer was not signed. The agreement stated that by signing this agreement the parties were giving up any right they may have had to sue each other and that the agreement could not be changed, except in writing and signed by all parties.

In response, the employee alleged that she signed the agreement “with the expectation and intent that it would be passed on for the signature of the appropriate Ref-Chem officer.” She asserted that it was her “intention that in order to be bound by the agreement to arbitrate, the employer would also have to sign the agreement and agree in writing to be bound by its terms.”

Based on the agreement, the district court granted the employer’s motion to compel arbitration. The district court concluded that the employee’s continued employment after signing the arbitration agreement constituted acceptance of the agreement by both her and the employer. The employee appealed.

Signature requirement. Under Texas law, a binding contract requires: “(1) an offer; (2) an acceptance in strict compliance with the terms of the offer; (3) a meeting of the minds; (4) each party’s consent to the terms; and (5) execution and delivery of the contract with intent that it be mutual and binding.” Whether a signature is required to bind the parties is a question of the parties’ intent. Signatures are not required “as long as the parties give their consent to the terms of the contract, and there is no evidence of an intent to require both signatures as a condition precedent to it becoming effective as a contract.”

The arbitration agreement here contained: (1) a statement that by signing this agreement the parties were giving up any right they may have had to sue each other; (2) a clause prohibiting modifications unless they are “in writing and signed by all parties;” and (3) a signature block for the employer. The Fifth Circuit concluded that this express language clearly indicated an intent for the parties to be bound to the arbitration agreement by signing. The agreement also identified in the first line the employer and employee whose signature was affixed thereto. This clause made clear the parties’ intention that the employer would sign the agreement.

While the employer was correct when it noted that Texas courts have held that a signature block by itself is insufficient to establish the parties’ intent to require signatures, in this case, the appeals court found more than a blank signature block that spoke to the parties’ intent. The agreement also contained language that the parties needed to sign the agreement to give it effect or to modify it.

Continued employment. Rejected was the employer’s contention that even though the arbitration agreement was not signed it was valid as a matter of law because: (1) the employer provided notice of the agreement; and (2) the employee accepted the agreement by continuing to work after receiving the notice. Here, the appeals court found the employer was wrong in its focus on acceptance, and its assertion that the agreement informed the employee that her continued employment constituted acceptance. Rather, the issue in this case was the execution element of a binding contract. Moreover, the agreement did not state that submission to arbitration was a term of employment and that commencing work constituted acceptance and binds the parties. Instead, the language about continued employment provided that “continuation” of the “employment relationship” serves as consideration for the agreement.

Because there was not a valid agreement to arbitrate, the district court’s judgment compelling arbitration was reversed.

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