Thursday, April 11, 2019
Court of Appeal:
Majority: Employer’s Declaration That Continued Employment Constituted Assent Was Effective
Dissent: Deference Should Be Accorded Trial Court’s Determination That No Agreement Existed
By a MetNews Staff Writer
An employee is obliged to arbitrate any disputes with the employer once the employer declares that continued employment manifests assent to such a requirement, even if the employee declines to sign an arbitration agreement, the Court of Appeal for this district held yesterday.
Acting Presiding Justice Laurie Zelon wrote for herself and Justice Gail Ruderman Feuer, and Justice John Segal dissented. The majority’s opinion reverses an order by Los Angeles Superior Court Judge William F. Fahey denying petition by Sohnen Enterprises to compel arbitration of a workplace discrimination action brought by its employee Erika Diaz.
Segal expressed the view that the majority failed to accord proper deference to Fahey’s finding that no agreement to arbitrate had come into existence.
Diaz brought her action on Dec. 22, 2016. Twenty days earlier, the employer had announced its policy requiring arbitration of disputes.
The day after Diaz sued, she and her lawyer presented a letter to the employer indicating that she would not sign the arbitration agreement—something Diaz had orally told an employee in the company’s Human Resources Department on Dec. 16,
In denying Sohnen’s motion to compel arbitration, Fahey said the purported agreement to arbitrate was a “take-it or leave-it” contract of adhesion, and declared:
“There is no meeting of the minds.”
Explaining the reversal, Zelon said:
“California law in this area is settled: when an employee continues his or her employment after notification that an agreement to arbitration is a condition of continued employment, that employee has impliedly consented to the arbitration agreement.”
“The uncontradicted evidence in this record demonstrates that Diaz maintained her employment status between December 2 and December 23, and remained an employee at the time of the hearing in this case. As a result, she was already bound by the arbitration agreement before the presentation of the letter indicating both her rejection of the agreement and her intent to remain employed. Although Diaz now asserts that this forced Sohnen to choose whether to proceed without arbitration, this is incorrect. At most, the letter was an attempt to repudiate the agreement….
“In any event, because the employment agreement between Diaz and Sohnen was at-will, Sohnen could unilaterally change the terms of Diaz’s employment agreement, as long as it provided Diaz notice of the change.”
Once a party has shown that an agreement to arbitrate had been formed, Zelon said, the burden shifts to the party resisting arbitration to show unenforceability of the agreement. This can be done, she noted, by showing unconscionability—an issue not reached by Fahey.
“This record contains no evidence of surprise, nor of sharp practices demonstrating substantive unconscionability,” Zelon wrote, adding:
“While Diaz argues in the introduction to her briefing that the agreement is substantively unconscionable, she fails to specify, with appropriate citations to the record and relevant legal authority, any terms of the agreement that she believes are unconscionable. Accordingly, Diaz has waived any argument that the agreement is unenforceable.”
The matter was remanded for further proceedings.
Dissenting, Segal said:
“I agree an employee can impliedly accept an arbitration agreement by continuing to work for his or her employer. I also think an employee, like any other contracting party, can reject an arbitration agreement offered by an employer and yet continue to work for the employer. Whether an employer and an employee entered into an implied agreement regarding the terms of employment is a factual issue we routinely ask a trier of fact to decide in employment cases. Because the facts in this case do not support only one reasonable conclusion, I would defer to the trial court’s resolution of that factual issue.”
Segal said there were factual disputes including whether it was effectively communicated on Dec. 2, 2016, at a meeting, that employees, by staying on, were assenting to arbitrate. Conflicting versions of what occurred came before Fahey, Segal recounted.
“This evidence created factual disputes and supported different reasonable conclusions about what happened and whether Diaz impliedly agreed to Sohnen’s proposed arbitration agreement,” the jurist said. “The trial court resolved this conflict in favor of Diaz and ruled the parties did not reach an implied agreement to arbitrate.”
“We do not have the authority to reweigh the evidence and come to a different conclusion, let alone conclude the evidence compels a finding the parties did enter into an implied agreement.”
Another Factual Dispute
There was also a factual dispute as to whether an employee would need to execute the written arbitration agreement that was presented in order to be contractually bound to arbitrate, Segal said, commenting:
“Again, the trial court resolved this conflict against Sohnen and found Diaz did not accept the agreement, a finding we should respect on appeal.”
None of the cases cited by Diaz or by the majority, he pointed out, entailed a situation where an employee expressly disavowed an intent to enter into an arbitration agreement “as Diaz did here twice (once orally and once in writing).”
Standard of Review
The majority and the dissenter were at odds over what standard of review should be applied. Zelon said:
“The facts in the record are undisputed. Accordingly, our review is de novo.”
Segal countered that there were factual disputes and wrote:
“Because we are reviewing the trial court’s resolution of a factual issue, I would not apply, as the majority does, a de novo standard of review. Indeed, I would not even apply a substantial evidence standard of review. I think the standard of review is much more onerous on the appellant in this case.”
The appropriate inquiry in determining whether Sohnen met its burden of proof in showing the existence of an arbitration agreement, Segal contended, was “whether the evidence compels the opposite finding as a matter of law.”
He cited a 2013 Fifth District Court of Appeal decision, Dreyer’s Grand Ice Cream, Inc. v. County of Kern, which quotes a 2009 Sixth District opinion, In re I.W., as saying:
“Thus, where the issue on appeal turns on a failure of proof at trial, the question for a reviewing court becomes whether the evidence compels a finding in favor of the appellant as a matter of law.”
The case is Diaz v. Sohnen Enterprises, 2019 S.O.S. 1722.
Attorneys on appeal were Gregory D. Wolflick, David B. Simpson and Theodore S. Khachaturian, of the Glendale firm of Wolflick & Simpson, for Sohnen and Orange County attorney Bruce Loren Karey for Diaz.
Copyright 2019, Metropolitan News Company