the situation
Your employee handbook requires that employees submit all employment
issues to an internal dispute resolution process and then arbitration
and provides that employees waive all rights to bring a lawsuit and to a
jury trial. You provide a copy of the employee handbook to all
employees and require that they sign a statement explicitly
acknowledging receipt of the handbook and agreeing to comply with its
terms. Can an employee then get around the arbitration provision and
file a lawsuit?
the ruling
Yes–if your employee handbook clearly states that it is not a
contract, then an employee may not be bound by a mandatory arbitration
provision (or presumably any other provision contained in the handbook).
The Fourth Circuit Court of Appeals recently affirmed the lower court’s
decision denying an employer’s motion to compel arbitration under these
circumstances, finding that the employer had failed to produce evidence
demonstrating that the employee had agreed to arbitrate any of her
claims. Lorenzo v. Prime Communications, L.P., No. 14-1727 (4th Cir., October 27, 2015).
Rose Lorenzo worked for Prime Communications, a retailer of AT&T
wireless devices, in one of its retail stores, selling cell phones and
service plans. She began as a solutions specialist and then became store
manager. She ultimately filed a claim against Prime Communications,
asserting that Prime incorrectly calculated her commissions and bonuses
and failed to pay her overtime pay in violation of the FLSA and North
Carolina wage and hour laws. The employer filed a motion to compel
arbitration, relying on an arbitration provision contained in its
employee handbook. The handbook stated that all employment issues would
first go to an internal dispute resolution process, then to mediation
and then to arbitration. It also stated that employees “waived all
rights to bring a lawsuit and to a jury trial regarding any dispute,”
including claims under the FLSA. Lorenzo had signed a form acknowledging
receipt of the handbook when she first started working for Prime. This
form stated that she understood she was responsible for reviewing the
handbook and that she agreed to comply with its provisions, but also
contained language often found in employee handbooks that no provision
contained therein should be construed to create any promises or
contractual obligations between Prime and its employees and that she
understood the information contained in the handbook served as
“guidelines only and are in no way to be interpreted as a contract.”
The employer argued that Lorenzo had agreed to arbitrate all disputes
relating to her employment by agreeing to all of the provisions of the
handbook. The employer claimed that the arbitration provision was
binding and severable from the rest of the handbook regardless of
whether the handbook was considered a contract overall. The district
court and the Fourth Circuit disagreed. Even if there was some sort of
implied assent to arbitration created by Lorenzo’s receipt and review of
the handbook and her continued employment, it was nullified by the
“express agreement” of the parties not to be bound by the terms set forth in the handbook.
the point
Employers frequently (and often appropriately) include a provision in
their handbooks stating explicitly that it does not create a contract
between it and its employees. But just remember this cuts both ways—the
employee is precluded from claiming entitlement to any rights pursuant
to the handbook, but so is the employer.
Originally posted to Virginia Employer Law Blog, by Elaine Inman Hogan on December 16, 2015.