Want to Arbitrate Employee Disputes? Keep Your Paperwork!

by Foley & Lardner LLP
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Arbitration agreements, and their use as a means to avoid class action disputes in particular, have been repeat news items in the last several years, and many companies continue to consider their use as a means to mitigate class action litigation risks. For companies who have implemented such agreements, a recent federal court decision reminds them of a seemingly simple – but nonetheless critical – point: keep accurate records of such agreements because courts may require proof before allowing a party to compel arbitration. (See Barkley, et al. v. Pizza Hut of America, Inc., et al., USDC, MDFL, Case No. 6:14-cv-376-Orl-37DAB.)

In the case, an employer moved to compel arbitration, noting that the representative employees had signed arbitration agreements, and asked the court for a ruling that individual arbitration – as opposed to class arbitration – was appropriate. All but a handful of the class members went to individual arbitration proceedings, but the employer could not locate signed arbitration agreements for those few members of the class. The employer told the court, by way of a declaration, that the employees “must have signed the agreements” because doing so was required by company policy and asked the court to find that the employees “bear the burden to create a genuine issue as to the existence of the arbitration agreement.”

The court noted, however, that the state of the law requires that the employer bear the initial burden to show there is a written agreement bringing the dispute under the Federal Arbitration Act. Only after the employer does so will the employees then have a burden to show they did not agree to the purported written agreement. As a consequence, the court rejected the employer’s attempt to compel arbitration for three of the employees who had brought the wage dispute against the company. According to the court, it simply “will not order plaintiffs to arbitrate when there is essentially zero evidence that they ever even saw, let alone assented to, an arbitration agreement.”

While it may seem like a fairly obvious point, the case nonetheless reminds companies using arbitration agreements of the importance of dotting all the I’s and crossing all the T’s when it comes to read-and-sign policy documents, and in particular arbitration agreements when large class action liability could be at stake. The decision also reminds companies that it is prudent to maintain arbitration agreement signature pages and other policy documents so they can be easily located and referenced. These seemingly small steps can make critical differences later on when significant economic consequences can ride on how good a comany’s recordkeeping has been.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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