California Court of Appeals Holds That No Initials Are of “No Legal Consequence” To Enforce Arbitration

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On July 8, 2020, the California Court of Appeals held that when an employee fails to initial a specific part of an arbitration agreement, but still signs it, the agreement is still enforceable.

Plaintiff Joseph Martinez brought a series of employment claims against his former employer, BaronHR, Inc., which moved to compel arbitration. Martinez opposed the motion to compel arbitration on the ground that he did not initial the provision outlining his agreement to waive his right to a trial by jury. Martinez argued that the absence of his initials expressed an intent not to arbitrate despite the fact that he actually signed the bottom of the agreement. The trial court agreed with Martinez, and BaronHR appealed.

The Court of Appeals reversed the trial court’s decision and compelled Martinez to arbitrate his claims. The Court found that the absence of Martinez’s initials on one specific provision was “of no legal consequence” because Martinez’s signature at the end of the agreement supported his intent to agree to all the terms therein.

The Court distinguished this holding from the holdings in Esparza v. Sand & Sea, Inc. and Mitri v. Arnel Management Co. The Court noted that in both of those cases, the employer sought to compel arbitration on the basis of an agreement included in an employee handbook, and they were not “stand-alone” agreements signed by the employee. The Court held that a signed stand-alone agreement evidences an intent to abide by the terms of the agreement.

Arbitration agreements are one of the best defenses an employer can implement against class actions and costly legal battles. This case presents yet another example of the variety of novel arguments being pursued by plaintiffs’ attorneys in an effort to avoid enforceability of arbitration agreements in California.

This decision, while beneficial for employers, stands as yet another reminder for employers to ensure that their arbitration agreements are stand-alone agreements, executed by the employees—and also to ensure that their agreements comply with the multiple requirements under California law.

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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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