Working into Arbitration: Binding Arbitration Pursuant to Employee Handbooks

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Employers and employees everywhere should check their employee handbooks – if it has an arbitration provision, it is likely any disputes between the two will take place in arbitration rather than in court.

In a recent decision, Daniels v. Raymours Furniture Company, Inc., C.A. 13-11551-MLW, the federal court for the District of Massachusetts held that an employee is compelled to arbitrate and is barred from bringing a suit if the employee handbook dictates that employment-related claims will be resolved through arbitration.

The employer argued that there was a valid agreement to arbitrate because the employee was notified of an update to the employee handbook that implemented an “Employment Arbitration Program,” which required employees to submit to arbitration of any employment-related claims. The employer argues that the employee was notified via email, reviewed the Arbitration Program electronically, and certified that he had read it by clicking a butting marked “done.” Accordingly, as argued by the employer, the employee entered into a binding agreement to arbitrate and the employee should be compelled to arbitrate.

The employee rejects this logic and argued that no binding agreement to arbitrate existed, as the program was never a part of any contract with the employer, he was informed that it did not create contractual obligations, and that employer’s representation of the employee handbook made it appear as informational rather than as a contract.

While noting that the employee was an at-will employee and that there was no actual employment contract, the district court agreed with the employer and held that there was a binding arbitration agreement, granting the employer’s motion to compel arbitration. The court’s reasoning was that a valid agreement to arbitrate arose from the employee’s acknowledgement that he had read and reviewed the arbitration program and that a reasonable employee would have known that the employee handbook provided the terms of an agreement to arbitrate.

Although there is no indication yet from the electronic docket that this case will be appealed, it very well might be, as it greatly broadens the scope of arbitration. According to the district court, an at-will employee is now compelled to arbitrate claims and barred from court if the employee handbook for his company contains an arbitration provision. Employers and employees alike should review their handbooks to ascertain whether or not they will be compelled to arbitrate pursuant to its terms.


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