Sign Here, Please

The recent ruling in a case that one attorney describes as “troublesome” holds a valuable lesson for employers and HR in the proper enforcement of arbitration agreements.

The details, according to a summary from White Plains, N.Y.-based employment and labor law firm Jackson Lewis …

In 2010, the Sports Club Co., headquartered in Los Angeles, revised its employee handbook to include an arbitration agreement that all employees were required to sign as a condition of employment. Susan Gorlach, the organization’s HR director at the time, was responsible for distributing the new handbook to employees and obtaining signed arbitration agreements.

In June 2010, Gorlach told the company’s chief operating officer that all but four corporate employees had signed the arbitration agreement, but neglected to mention that she was among that small group.

In July, Gorlach—still in the process of gathering employee signatures—reportedly suggested the company “think about” how to proceed should an employee ultimately refuse to sign. She resigned the following month, and subsequently sued TSC for wrongful termination, sexual harassment and retaliation, among other claims.

The company denied the allegations. In asking a trial court to compel arbitration, TSC argued that, through her continued employment with the organization, Gorlach assented to the arbitration agreement despite not signing it. A trial court declined to compel arbitration, ruling that Gorlach had, by omission, intentionally misled the company to believe she had signed the agreement. Nevertheless, the fact that Gorlach hadn’t signed led the court to rule that she was not equitably estopped from denying the existence of the agreement, and that no implied contract existed between the parties. The appeals court ruling affirms that decision.

“This is a troublesome case, because the person who was supposed to be the gatekeeper for ensuring the agreements to arbitrate were signed was able to avoid having to arbitrate her claims by a sleight of hand,” says Mark Askanas, partner and litigation manager in the San Francisco office of Jackson Lewis.

Employers’ and HR professionals’ takeaway from the case is clear, he says.

If your agreement to arbitrate specifically requires that employees sign the agreement, it must be signed to be enforceable. The employer’s belief—however reasonable—that an employee signed the agreement will not supplant this requirement.”

Employers can take one of two approaches to enforcing signature requirements, according to Askanas.

First, the agreement can state that disputes are subject to arbitration, regardless of whether the employee signed the agreement. Second, employers can implement a system that tracks the actual signatures to the agreement, and does not rely entirely on someone’s representation, express or implied, that he or she signed the agreement.”