Federal Appellate Court Rules that Employee not Bound by Arbitration Provision in Employee Handbook

Arbitration and the enforceability of arbitration provisions have been hot topics in employment and consumer litigation for a number of years. Over the last decade, the U.S. Supreme Court has issued numerous opinions on the subject as well have a number of state supreme courts. In Shockley v. PrimeLending, 929 F.3d 1012 (8th Cir. 2019), the federal appellate court of the Eighth Circuit recently held that an arbitration provision in an employee handbook was not binding on the employee.

The plaintiff, Jennifer Shockley, was employed by PrimeLending from June 2016 through July 2017. After leaving the company, Shockley filed a collective action lawsuit against PrimeLending in federal court for allegedly violating the Fair Labor Standards Act (FLSA). PrimeLending moved to compel arbitration on the basis that a provision in its employee handbook required all disputes to be decided by binding arbitration. The District Court denied PrimeLending’s motion. On appeal, the Eighth Circuit affirmed.

PrimeLending maintained an intranet accessible by its employees, which contained employment-related information, such as its new hire policies and its employee handbook. The employee handbook contained an arbitration provision which provided:

If the dispute cannot be settled through negotiation, you and the Company agree to attempt in good faith to resolve the covered dispute exclusively through final and binding arbitration in accordance with the terms, conditions, and procedures of this Arbitration Clause.

In addition, the handbook contained a delegation provision that provided:

The Arbitrator, and not any federal, state, or local court or agency, shall have exclusive authority to resolve any claim relating to the interpretation, applicability, enforceability or formation of this Clause including, but not limited to, any claim that all or any part of this Clause is void or voidable.

The Court noted that an arbitration agreement is at its core a contract and must be analyzed under contract law like any other agreement. The same is true of the delegation agreement. Thus, the case rested on whether the traditional elements of contract formation—offer, acceptance, and consideration—existed.

The Court noted that evidence established that Shockley accessed the company’s intranet twice during her employment, once in August 2016 and again in February 2017. On each occasion, she clicked on various documents available on the intranet, including the employee handbook. Clicking on a document in the intranet opened a window with a hyperlink to the text of the document as well as automatically generated an acknowledgment of review. Shockley did not recall reviewing the employee handbook and PrimeLending produced no additional evidence that she ever opened or reviewed the handbook’s full text.

Assuming that the arbitration and delegation provisions in the employee handbook constituted an offer, the Court found no evidence that Shockley accepted the offer. Merely viewing the handbook and the computer-generated acknowledgment were insufficient to establish acceptance. In other words, acknowledging receipt of the handbook (i.e. the offer) did not constitute acceptance of the terms in the handbook. The Court noted that the outcome may have been different if Shockley’s offer letter or the handbook stated that her continued employment was conditioned on acceptance of the terms of the employee handbook and that her continued employment constituted acceptance.

You can read the Court’s full opinion here.

Wise employers will ensure that employees sign a document stating that they have read the employee handbook and accept the terms contained in the handbook. Additionally, wise employers include in their offer letter a statement that the employee’s continued employment is conditioned on acceptance of the terms in the employer’s employee handbook.

Whether you are an employee being asked to sign a non-compete agreement or an employer needing a non-compete agreement or needing to see if your existing agreement is still valid, it is important to speak with an experienced non-compete and restrictive covenant law attorney. It is no less important to have a skilled non-compete attorney at your side if you find yourself in litigation over the enforcement of a covenant not to compete.

Super Lawyers named Illinois commercial law trial attorney Peter Lubin a Super Lawyer and Illinois business dispute attorney Patrick Austermuehle a Rising Star in the Categories of Business Litigation, Class Action, and Consumer Rights Litigation. Lubin Austermuehle’s Illinois business trial lawyers have over thirty years of experience in litigating complex employment, wage and hour, non-compete, non-solicitation, and non-disclosure litigation disputes. Our Western Springs and Hinsdale employment law and business dispute lawyers handle emergency business lawsuits involving injunctions, TROS, copyrights, trademarks, covenants not to compete, franchise, distributor and dealer wrongful termination and trade secret lawsuits and many different kinds of business disputes involving shareholders, partnerships, closely held businesses and employee breaches of fiduciary duty. We also assist Chicago and Oak Brook area businesses and business owners who are victims of fraud. You can contact us by calling (630) 333-0333. You can also contact us online here.

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