Arbitration continues to be popular with many employers. Two significant factors driving employers to arbitration, and away from state and federal courts, are the potential for lower defense costs and reduced risk of runaway jury awards that seem to be more common than ever before. Many lawyers think the benefits of arbitration are overstated and the costs understated, but the trend nonetheless is for more arbitration.
Of course, before an employee can be compelled to arbitrate an employment dispute, the employee must first agree to arbitrate. Many employers try to make an agreement to arbitrate a condition of continuing employment by putting an arbitration agreement in their employee handbook. If the employee acknowledges in writing the arbitration provision in a handbook, and continues to work thereafter, most courts will find that the employee manifested sufficient assent to the arbitration agreement and will compel arbitration.
But, a recent ruling from the Eighth Circuit shows the practice of relying on the employee’s assent to a handbook provision may not be enough to prove the employee agreed to arbitrate employment disputes. The case is Shockley v. Primelending (8th Cir., July 15, 2019). Shockley sued Primelending for alleged violations of the Fair Labor Standards Act (FLSA). The employer moved the court to compel arbitration, relying upon the arbitration provision contained in its employee handbook. The district court denied the motion, finding there was no enforceable agreement to arbitrate, which the court of appeals affirmed.
The handbook in question was maintained on an intranet accessible by Primelending’s employees. In August 2016, two months after she was hired, Shockley accessed the company intranet, clicked on and opened several company documents, including the handbook. When an employee enters the area of the intranet containing the handbook, the employee is advised that by entering she thereby acknowledges review of the materials therein. But, the click that generates the acknowledgement did not actually open the full text of the handbook. Rather, the click generated a pop-up window that contained a link, which itself had to be clicked to open the full handbook. Shockley went through the same process again in February 2017 as part of an annual policy review. Shockley testified that she did not remember reviewing the handbook either time. Nor was there evidence Shockley actually clicked on the link in the pop-up window that would have taken her to the full text handbook.
The court found that, at best, Shockley was aware of the existence of the arbitration provision in the handbook. But, knowing the agreement is there and actually agreeing to be bound by its terms are two different things. The court held that the “employee’s general knowledge or awareness of the existence of a contract” is not sufficient to constitute “the positive and unambiguous acceptance required under Missouri law.”
Fortunately for those employers who like arbitration, Shockley does nothing to alter your rights to condition continued employment on the employee’s agreement to arbitrate. But, the opinion should cause employers to rethink how they go about obtaining the employee’s consent. Using a computer based system for employee review and acknowledgement is efficient, but it may be more difficult to prove the employee actually read and assented to the arbitration agreement. An employer may not be able to impose consent on an employee simply by having a pop-up window appear that says, in effect, “by entering the site you acknowledge reviewing its contents.” The best evidence of assent may be obtained the old-fashioned way; that is, having the employee review the arbitration agreement in document form and specifically acknowledge in writing that she received and read it. Or, an electronic system could still be used if it included the ability to obtain an electronic signature. No matter how you obtain the employee’s agreement, it should be done in a way that can be reliably proved in the event the employee challenges its enforcement.