Is Staying at Work an Agreement to Arbitrate?

In the wake of the highly publicized United States Supreme Court decision in AT&T Mobility v. Concepcion, many management-side lawyers have urged their clients to take advantage of the decision. Specifically, they have urged employers who have arbitration agreements with their employees to add a class waiver provision to the agreement; as for their clients who don’t yet have an arbitration agreement, some counsel have advised them to adopt an arbitration agreement with a class waiver provision.

If an employer imposes a new or revised policy requiring all disputes to be arbitrated, is that policy binding on employees who don’t sign it? What if the employer’s announcement states that the new arbitration policy is mandatory and that employees who continue in employment are deemed to have accepted it whether or not they actually sign it? Would it matter if an employee actually objected to the policy, and told the company that he had no intention of arbitrating claims?

These intriguing questions are addressed in the recent Northern District of California case of Bayer v. Neiman Marcus Holdings, Inc. Plaintiff Bayer was employed by Neiman Marcus in 2007 when it advised its employees by mail that it was implementing a mandatory arbitration program. Employees were provided with an arbitration agreement, which they were directed to sign. The plan also stated that acceptance of the plan was a condition of ongoing employment, so that even employees who did not sign it were deemed to accept it by remaining on the job. Bayer not only did not sign the agreement, he told Neiman Marcus both orally and in writing that he refused to become a party to the agreement. He did, however, remain an employee. Four years later Bayer was terminated, and he filed a lawsuit in court. Neiman Marcus filed a motion to dismiss the lawsuit and compel arbitration, pursuant to the arbitration agreement, which it claimed Bayer had accepted by virtue of remaining in employment after the policy had been distributed.

The court denied Neiman Marcus’ motion to compel arbitration. The court began its discussion of the issue by noting that under California law an employee’s acceptance of the terms of an arbitration agreement can be either express or implied-in-fact. In this case, since the employee did not sign the agreement, there was no express acceptance. The court further held that in light of the employee’s written and oral objections to signing the agreement, there could not be an implied-in-fact contract either, even though the employee remained on the job.

It is not yet clear whether this district court case, which involves a statutory claim, would also apply to common law claims such as wrongful termination in violation of public policy. Bayer is on appeal to the Ninth Circuit, and it will be interesting to see how that court rules.  Bayer raises important questions as to whether an employer’s unilateral implementation or revision of an arbitration program, whether to prohibit class actions or for any other reason, will be deemed binding even if an employee did not expressly agree to accept the new term. An implied acceptance, such as remaining in employment, may not suffice. Stay tuned.