Thursday, September 1, 2011

Can a handbook policy bind an employee to arbitration? 6th Circuit says no.

We spend a lot of time debating the respective merits of fine point of the law. The reality, however, is that judges are people too. Despite their training, robes, and gavels, the decision of many cases comes down to one key fundamental question: did one side treat the other side fairly? Courts don’t like litigants that try to pull a fast one.

Hergenreder v. Bickford Senior Living Group [pdf] provides a perfect example. It also illustrates why arbitration of employment disputes often is a losing battle.

Bickford filed a motion to compel Hergenreder to arbitrate her disability discrimination case under an arbitration clause buried in its employee handbook. Section 12 of the 16-section handbook—for which Hergenreder had signed an acknowledgment that she had read and understood its terms—provides as follows: “Dispute Resolution Process  Please refer to the Eby Companies Dispute Resolution Procedure (DRP) for details.” The separate, 20-page DRP, in turn, required that employees submit all claims to arbitration. The employee testified that she never saw the DRP, let alone signed for it.

The court concluded that simple inclusion of a reference to the DRP in the handbook did not constitute a binding and enforceable contract between Hergenreder and Bickford to arbitrate all employment claims:

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.” 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[.]”

[T]here is no evidence that the DRP was “posted” in a place—either physical or electronic—available to Hergenreder, that there were meetings at which Hergenreder was notified of the policies, or that Hergenreder was aware of the DRP at all…. Bickford does not argue that it actually distributed or made the DRP available to Hergenreder.

Employers, if you are going to require employees to arbitrate their claims against you, do yourself a favor and at least have the employee sign a separate arbitration agreement. You might succeed on enforcing an alternative form of an alternative dispute resolution agreement (such as a handbook clause). But, you will spend the money you perceive you are saving through arbitration by trying to enforce your right to arbitrate.

Written by Jon Hyman, a partner in the Labor & Employment group of Kohrman Jackson & Krantz. For more information, contact Jon at (216) 736-7226 or