Arbitration Agreements Lacking Employer’s Signature Can Be Enforceable, Says Texas Appellate Court (US)
On April 16, 2020, a three-judge panel of the Court of Appeals for the First District Court of Texas held that an employer could compel a former employee to arbitrate her wrongful termination case, even though it had not signed the arbitration agreement, because the evidence demonstrated that the employer intended to be bound by the agreement and there was no evidence that the parties intended for the employer’s signature to be a condition precedent to the contract’s enforcement.
In SK Plymouth, LLC et al. v. Simmons, the plaintiff brought a wrongful termination suit against her former employers SK Plymouth, LLC, SK E&P Operations America, LLC (SKEPOA), and her former supervisor (collectively the “Appellants”), claiming that her employment was terminated in retaliation for reporting her supervisor’s harassing conduct to the human resources department. Specifically, the plaintiff alleged that her supervisor mistreated her based on her gender, race, age, and national origin and that after she reported his behavior to human resources, she was subjected to a hostile work environment and ultimately terminated. Based on an arbitration agreement signed by the plaintiff when she began her employment, the Appellants filed a motion to compel arbitration under the Federal Arbitration Act (FAA). The agreement contained a signature block for the company, but was never signed by a company representative. The plaintiff asserted that the arbitration agreement was not an enforceable, binding contract because it was not signed by SKEPOA.
The trial court denied the Appellants’ motion to compel arbitration and their motion for reconsideration. Appellants appealed, and argued, in part, that the trial court incorrectly denied their motion to compel arbitration because there was a valid arbitration agreement, and the plaintiff’s claims were within the scope of the agreement. The plaintiff argued that the parties had agreed that SKEPOA’s signature was required, and therefore the agreement, lacking that signature, was unenforceable.
Under Texas law, the elements of a valid contract are: (1) an offer, (2) an acceptance, (3) a meeting of the minds, (4) each party’s consent to the terms, and (5) execution and delivery of the contract with the intent that it be mutual and binding. According to the court, this case hinged on whether SKEPOA assented to be bound, despite the fact that it did not sign the agreement. Typically, parties express mutual assent by signing an agreement. However, a signature is not mandatory, and the Texas Supreme Court has held that the FAA does not require parties to sign an arbitration agreement for it to be enforceable so long as the agreement is in writing and agreed to by the parties. With that said, a party’s failure to sign an agreement will render it unenforceable when the terms of the contract require a party’s signature to make the agreement binding.
Here, the appeals court held that because there was enough evidence that SKEPOA intended to be bound by the arbitration agreement, and because the agreement did not contain language suggesting that SKEPOA’s signature was a condition to the validity of the agreement, the agreement was enforceable. The court reasoned that a blank signature block alone does not establish that a signature is a condition precedent to the agreement’s enforceability. Further, the court noted that the language in the arbitration agreement preceding the signature line did not indicate that the parties’ signatures signified that they were agreeing to be legally bound to the terms of the contract. Rather, the agreement in this case simply stated that the signatures constituted “Acknowledgement of Receipt.” Moreover, SKEPOA clearly relied of the arbitration agreement and took overt steps to enforce it. Therefore, the court concluded that the arbitration agreement was valid because SKEPOA assented to the agreement and intended to be bound by it, even though the company did not sign the agreement.
Although it is still important for Texas employers to be vigilant about administrative hygiene and to have a company representative sign contracts that they intend to enforce, this case demonstrates that a signature is not always necessary for enforcement. With that said, Texas employers who have a practice of not having a company representative sign arbitration or other employment agreements on behalf of the company should review their agreements to ensure that the company’s signature is not a condition precedent for enforceability of the agreement. Texas courts will likely not enforce unsigned arbitration agreements that contain such language requiring both parties’ signatures to make the agreement binding.