Tuesday, August 30, 2011

Sixth Circuit Holds Employee Did Not Agree to Arbitration When Handbook Simply Referred to Dispute Resolution Procedure

Bickford Senior Living Group fired Maureen Hergenreder, a nurse, in early January 2007 and she filed a lawsuit alleging her firing violated the Americans with Disabilities Act.  Bickford moved to compel arbitration.  None of the documents Hergenreder signed when she started employment (only a few months before she was fired) mentioned arbitration.  Bickford's employee handbook, as is typical, said it was not a contract of employment, but that it was a summary of policies and procedures that apply to employment.

The handbook made no mention of "arbitration" as such.  Instead, it stated: “Dispute Resolution Process Please refer to the Eby Companies Dispute Resolution Procedure (DRP) for details.”  The Dispute Resolution Procedure, of course, required employees to submit all disputes to arbitration.  While Hergenreder acknowledged receipt of the employee handbook, she submitted an affidavit in which she stated she had "never seen or signed" for the Dispute Resolution Procedure.  Bickford did not produce any acknowledgment form signed by Hergenreder for the Dispute Resolution Procedure.  Instead, it provided an affidavit from its Vice President of Employee Relations, Jerry Knight, who states that the DRP “is distributed to employees.”

Absent evidence that Hergenreder had actual knowledge of the arbitration clause or at least was advised of the significance of the Dispute Resolution Procedure, the Sixth Circuit held Hergenreder could not be compelled to submit her ADA claim to arbitration (emphasis added):
There was neither an offer nor an acceptance. The objective signs that Bickford made Hergenreder an offer to be part of the arbitration agreement are few in number. The best Bickford can say is that Hergenreder was informed that, for “Employee Actions,” she should “refer” to the DRP. In Bickford’s view, Hergenreder “was or should have been aware of the DRP and so is bound by it.” Bickford Br. at 13 (capitalization removed). Yet she was not required to refer to the DRP; the “handbook does not constitute any contractual obligation on [Hergenreder’s] part nor on the part of Bickford Cottage[.]” Hergenreder Br. at Ex. 6 (Receipt of Employee Handbook Form). Moreover, the simple reference in the Handbook to “the Eby Companies Dispute Resolution Procedure” for “details” is not “the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.” Kloian, 733 N.W.2d at 770 (internal quotation marks omitted). This statement says nothing about arbitration, and it says nothing that would indicate to Hergenreder that accepting or continuing her job with Bickford would constitute acceptance. Indeed, it is incorrect to conflate the fact that Hergenreder knew generally of the DRP with the notion that she knew of the arbitration language—and Bickford’s desire to create an arbitration agreement—contained within the DRP. Were Hergenreder required to read, or even notified of the importance of reading, the DRP, the analysis here might be different. But this court’s inquiry is focused on whether there is an objective manifestation of intent by Bickford to enter into an agreement with (and invite acceptance by) Hergenreder, and we are not convinced that there is any such manifestation made by Bickford in the record in this case.
It turns out the holding is relatively narrow.  If the employee handbook or any other document the employee signs does not expressly require arbitration of employment disputes, then the document must at least emphasize the "importance of reading" the document that contains the arbitration clause.  The decision serves as a good reminder that the best course for employers is to have the employee sign a document consenting to arbitrate all employment disputes.  While the Sixth Circuit may require less than this, there's no reason to beat about the bush on something like this.

In fact, I'm having a hard time understanding why the employer didn't mention the arbitration clause here.  Perhaps it was just a clerical oversight.  In any event, employers are generally free to draft policies and procedures how they want.  In drafting employment contracts, policies and even benefit plans, I often advise clients to "take the easy road" and include language that will avoid a dispute if at all possible.  It is relatively easy to add a sentence to a policy when drafting a document especially if it might avoid costly litigation.