December 18, 2018

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A New Years’ Resolution for Your Handbooks: Keep Your Arbitration Agreements Out

As the new year quickly approaches, it is a good time to review your company’s handbook and policies. One important issue to look for is whether your arbitration agreement is part of the handbook.

A recent case out of El Paso serves as good reminder that arbitration agreements contained in handbooks can be problematic if a company tries to compel arbitration. At the beginning of most handbooks, there is usually some variation of the statement that the policies contained in the handbook do not constitute a contract and are subject to unilateral revision by the company at any time. For the most part, this disclaimer serves as a reminder to employees that their employment is at will. If, however, the arbitration agreement is part of the handbook, then the “not a contract” language could be interpreted to apply to the arbitration agreement as well.

This is the issue that arose in Whataburger Restaurants LLC v. Cardwell, ___ S.W.3d ___, 2017 WL 3167487 (Tex. App.—El Paso 2017).  Yvonne Cardwell, a Whataburger employee, sued her employer due to injuries she incurred while at work. Whataburger moved to compel arbitration. In support of its motion to compel, Whataburger introduced evidence that it had an arbitration agreement in its handbook, and that Cardwell signed an acknowledgement of receipt of the handbook. The acknowledgment sheet also included “a specific place where Cardwell acknowledged the binding nature of the arbitration policy.” Whataburger also showed that Cardwell’s regular paychecks “contained an almost identically worded statement acknowledging the arbitration policy.”

Nevertheless, “Cardwell opposed arbitration on a number of grounds including claims that the [arbitration] agreement was unconscionable and illusory.”  Cardwell argued that the arbitration agreement was contained in the handbook, which stated that Whataburger could change the handbook at any time—unilaterally— effectively nullifying the arbitration agreement due to lack of consideration.

Key Takeaways

An arbitration agreement can be a very helpful tool for an employer. Arbitration can often lead to quicker resolution of cases, and, as a tactful advantage, employers can compel a case to arbitration out of a plaintiff-friendly venue. However, an arbitration agreement is only useful if it is enforceable when it comes times to compel arbitration. Arbitration agreements contained in handbooks may not be enforceable due to lack of consideration. As a result, employers may want to implement arbitration agreements as separate, stand-alone documents that are not subject to unilateral revisions.  

While the Whataburger case was sent back to the trial court to explore whether the arbitration agreement is enforceable, the lesson all employers can take away from this case is that a stand-alone arbitration agreement may be easier to enforce to compel arbitration. So, review those handbooks, and, if necessary, start planning on rolling out new, stand-alone arbitration agreements as part of the company’s “2018 New Year” policy updates.

© 2018, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.

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About this Author

Raven Applebaum, Ogletree Deakins, employment law guidance attorney, start up ventures lawyer
Of Counsel

Raven Applebaum is a Board Certified attorney offering 10 years of experience as in-house and outside counsel with a targeted emphasis in employment law. Throughout her career, Ms. Applebaum has provided human resource and employment law guidance on complex employment law issues to employers of every size, from start-up ventures to Fortune 500 businesses She has a wide range of experience in federal, state and local employment regulations. She has developed strategies, counseled and trained employers to effectively manage risks regarding EEO, NLRB, Wage and Hour, OFCCP,...

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