Evidence still matters when moving to compel arbitration (Avery v. Integrated Healthcare)

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Once again, I find myself playing catch-up after devoting a lot of spare time to examining the logistics of career moves.  In this installment, we see that evidence still matters when moving to compel (or resist) arbitration.  In Avery v. Integrated Healthcare Holdings, Inc., (Jun. 27, 2013; pub. ord. Jul. 23, 2013), the Court of Appeal (Fourth Appellate District, Division Three) affirmed a trial court order denying motions to compel individual arbitration.  The plaintiffs filed a wage & hour class action against defendants, alleging failure to pay overtime properly for employees working on 12-hours shifts.  Defendants filed eight motions to compel individual arbitration against the plaintiffs.  The trial court denied all motions, finding Integrated “failed to meet [its] burden to show that any of the Plaintiffs are subject to an enforceable arbitration agreement."

The Court of Appeal agreed with the trial court’s conclusion that defendants could not simply collect an assortment of documents, modified over time, and claim enforceable arbitration agreements or class waiver clauses:

Integrated sought to compel Plaintiffs to individually arbitrate their claims based on two arbitration agreements: (1) the Fair Treatment Process in the Tenet Employee Handbook, and (2) the Alternative Dispute Resolution Process in the Integrated Employee Handbook. We conclude Integrated is limited to the Fair Treatment Process because (1) it issued the Integrated Employee Handbook and its Alternative Dispute Resolution Process after Plaintiffs’ claims accrued, and (2) it failed to notify Plaintiffs or any other employees about the Integrated Employee Handbook.
Four months after Avery filed her initial class action complaint, Integrated unilaterally modified the Fair Treatment Process in the Tenet Employee Handbook by renaming it the Alternative Dispute Resolution Process and adding a class arbitration waiver. Integrated modified the Fair Treatment Process based on a provision that authorized the employer to “change or modify the FTP procedures from time-to-time without advance notice and without the consent of employees.” Integrated posted the Integrated Employee Handbook containing the Alternative Dispute Resolution Process on its intranet page, but it did not provide employees with a copy of the new handbook, instruct employees to review the new handbook on the intranet page, or even notify employees of the new handbook’s existence.

Slip op., at 10.  The Court went on to hold that the right to unilateral modification is governed by the covenant of good faith and fair dealing:  “An arbitration agreement between an employer and an employee may reserve to the employer the unilateral right to modify the agreement. (24 Hour Fitness, supra, 66 Cal.App.4th at pp. 1214-1215.) But the covenant of good faith and fair dealing implied in every contract requires the employer to exercise that right fairly and in good faith so as not to deprive the employee of his or her reasonable expectations under the agreement.”  Slip op., at 10.

The Court also found that defendant failed to provide adequate evidence of an enforceable agreement accepted by the plaintiffs.  Having affirmed the trial court on that ground, the Court declined to analyze whether the class waivers that defendants added later were simply statements of existing law under Stolt-Nielsen.

The Court concluded its opinion by stating that an arbitration agreement in an employee handbook could be enforceable, so long as the agreement and its acceptance are adequately proven by substantial evidence.