Manager’s waffling can invalidate otherwise-Legitimate arbitration policy — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

Manager’s waffling can invalidate otherwise-Legitimate arbitration policy

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Texas employers that want their employees to give up the right to take employment disputes to court must make sure they are clear about that intention. Although employees don’t actually have to sign the agreement to arbitrate, they must understand that the agreement is a condition of employment.

Any backpedaling by supervisors or managers can kill the arbitration agreement even if it appears in the company handbook. Telling employees “Don’t worry about it” is the worst thing a manager can do.

Recent case: Jose Moran and other employees sued Ceiling Fans Direct for overtime and other alleged Fair Labor Standards Act (FLSA) violations. The company pulled out its employment dispute arbitration agreement and asked that the case be dismissed.

But the employees testified they never saw or signed the original arbitration agreement, which was discussed briefly during a staff meeting. Employees were told that the agreement meant they couldn’t sue the company and that refusing to sign wouldn’t make any difference. But the same manager who explained the agreement at the meeting later told an employee “not to worry about it.”

Then the company issued a new handbook, which included the arbitration policy. There was a signature line, but employees were not required to sign. Plus, the supervisor gave employees contradictory information about the effect of the clause on their rights.

The court allowed the lawsuit to go forward, ruling that the arbitration agreement wasn’t valid. To be enforceable, changes to the at-will employment relationship (such as requiring employment disputes to be arbitrated) are effective only if employees have notice and accept the changes. There’s no requirement that they sign the agreement—but the company must make it clear that the change is binding.

In this case, the backtracking indicated the company hadn’t made clear the binding nature of the change. (Moran, et al., v. Ceiling Fans Unlimited, No. 06-20810, 5th Cir., 2007)

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