Employer’s Signature May Not Be Essential to Enforceability of Arbitration Agreement
The Court of Appeals for the First District of Texas recently held that the absence of the employer’s signature from an arbitration agreement did not render that agreement unenforceable. SK Plymouth, LLC v. Simmons, No. 01-19-00433-CV (April 16, 2020). Central to the court’s holding was the absence of any language in the arbitration agreement indicating that the employer’s signature was a condition precedent to the enforcement of the agreement.
Jean Elizabeth Simmons began employment with SK Plymouth, LLC, in May 2018. SK Plymouth is an affiliate of SK E&P Company/SK E&P Operations America, LLC (SKEPOA), the president of which contacted Simmons in June 2018 to notify her that she would transition to employment with SKEPOA on July 1, 2018. Simmons signed this transfer letter, indicating she accepted her new position with SKEPOA.
On July 12, 2018, Simmons signed an arbitration agreement, which referenced the at-will relationship between her and SKEPOA, “the mutual desire of the parties to enter into the [a]greement,” and the agreement of the parties to arbitrate all disputes, claims, and controversies. The arbitration agreement contemplated the signature of both parties, evidencing each party’s acknowledgment of receipt. Simmons signed her acknowledgment of receipt on July 12, 2018, but SKEPOA did not.
In October 2018, SKEPOA terminated Simmons’ employment, and thereafter, she filed suit against SK Plymouth and SKEPOA, alleging discrimination and retaliation, based on her allegations that her supervisor “had engaged in harassing and abusive conduct toward her.” In answering the lawsuit, the defendants asserted that Simmons’s claims were subject to an applicable arbitration agreement, and later, SKEPOA moved to compel arbitration, citing to the arbitration agreement signed by Simmons in July 2018.
In response, Simmons challenged the enforceability of the arbitration agreement by citing to the lack of any signature from SKEPOA. Additionally, Simmons raised the issue of whether she was ever an employee of SKEPOA since SKEPOA was unable to locate a signed copy of the transfer letter from July 2018. Simmons also submitted an affidavit regarding her own claimed confusion relative to the identity of her employer. On May 16, 2019, the trial court denied SKEPOA’s motion to compel without specifying any reason for the denial, and the defendants appealed.
Court of Appeals Decision
The Court of Appeals for the First District reversed and remanded, holding the arbitration agreement to be enforceable and applicable to Simmons’s claims. While acknowledging that the enforceability of a contract requires mutual assent, “[T]he Supreme Court of Texas has held that the FAA [Federal Arbitration Act] does not require parties to sign an arbitration agreement for it to be valid ‘so long as [the agreement is] written and agreed to by the parties.]” The court went on to state that “[u]nder principles of Texas contract law, a party’s failure to sign an agreement will render it unenforceable when the terms of the contract make it clear that the party’s signature is required to make it binding.”
Applying these principles, the court noted that nothing in the language of the arbitration agreement contemplated the employer’s signature “as a condition precedent to the agreement’s enforceability.” The fact that Simmons had to sign the arbitration agreement to demonstrate her acknowledgment of receipt was insufficient, by itself, to conclude that SKEPOA was required to sign the agreement as evidence of its assent. In the absence of SKEPOA’s signature, the court concluded that SKEPOA nevertheless intended to be bound by the agreement because the agreement bound “the parties” to submit to arbitration and SKEPOA drafted the agreement in the first instance.
In reversing the lower court’s decision, the court rejected Simmons’s argument related to whether she had been an employee of SKEPOA. Neither SK Plymouth and SKEPOA’s inability to find a signed transfer letter, nor Simmons’s affidavit, negated the employer’s evidence that she had been employed by SKEPOA, which included her payroll records and an affidavit regarding her transfer. Moreover, as the court explained, her argument had nothing to do with the ultimate issue on appeal, which was whether SKEPOE had assented to the arbitration agreement given the absence of its signature.
Going forward, employers may want to ensure their arbitration agreements include their own representatives’ signature. Recognizing, however, that this can be overlooked, particularly as many employees are now working from home, employers may want to review the language of their arbitration agreements to determine whether their agreements require the company’s signature as a condition precedent to its enforceability. Eliminating such language can minimize the risk that arbitration agreements are found to be unenforceable simply because the employer’s signature is missing.